Download placement agreement - Camlin Fine Sciences

Preliminary Placement Document
Not for Circulation
Private and Confidential
Serial No. [●]
The information in this Preliminary Placement Document is not complete and may be changed. The Issue is meant only for QIBs on a private placement basis and is not
an offer to the public or to any other class of investors to purchase the Equity Shares. This Preliminary Placement Document is not an offer to sell any Equity Shares and
is not soliciting an offer to subscribe to or buy the Equity Shares in any jurisdiction where such offer, sale or subscription is not permitted. It is being issued for the sole
purpose of information or discussion relating to the Equity Shares that may be Allotted through the Preliminary Placement Document.
CAMLIN FINE SCIENCES LIMITED
Originally incorporated as “Camlicon Consultants Private Limited” on November 30, 1993, the name of our Company was changed to “Camlin Fine Sciences Limited” on August
27, 2011 under the Companies Act, 1956. The registered office of our Company is at WICEL, Plot No. F/11 and F/12, Central Road, Opposite SEEPZ Main Gate, Andheri (East),
Mumbai 400 093, Maharashtra; Telephone: (91 22) 6700 1000; Fax: (91 22) 2832 4404; Email: [email protected]; Website: www.camlinfs.com; Corporate identification
number: L74100MH1993PLC075361.
Camlin Fine Sciences Limited (our “Company” or the “Issuer”) is issuing up to [●] equity shares of face value of Re. 1 each (the “Equity Shares”) at a price of Rs. [●] per Equity
Share, including a premium of Rs. [●] per Equity Share, aggregating up to Rs. [●] lakh (the “Issue”).
ISSUE IN RELIANCE UPON SECTION 42 OF THE COMPANIES ACT, 2013, AS AMENDED, READ WITH RULES MADE THEREUNDER, AND CHAPTER VIII
OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009, AS AMENDED
(THE “SEBI ICDR REGULATIONS”).
THIS ISSUE AND THE DISTRIBUTION OF THIS PRELIMINARY PLACEMENT DOCUMENT IS BEING MADE TO QUALIFIED INSTITUTIONAL BUYERS
(“QIBs”) AS DEFINED IN THE SEBI ICDR REGULATIONS IN RELIANCE UPON CHAPTER VIII OF THE SEBI ICDR REGULATIONS, AS AMENDED AND
SECTION 42 OF THE COMPANIES ACT, 2013, AS AMENDED, AND RULES MADE THEREUNDER. THIS PRELIMINARY PLACEMENT DOCUMENT IS
PERSONAL TO EACH PROSPECTIVE INVESTOR AND DOES NOT CONSTITUTE AN OFFER OR INVITATION OR SOLICITATION OF AN OFFER TO THE
PUBLIC OR TO ANY OTHER PERSON OR CLASS OF INVESTORS WITHIN OR OUTSIDE INDIA OTHER THAN QIBs. THIS PRELIMINARY PLACEMENT
DOCUMENT WILL BE CIRCULATED ONLY TO SUCH QIBs WHOSE NAMES ARE RECORDED BY OUR COMPANY PRIOR TO MAKING AN INVITATION
TO SUBSCRIBE TO EQUITY SHARES.
Invitation for subscription of the Equity Shares shall only be made pursuant to this Preliminary Placement Document, together with the Application Form and the Placement
Document. For further details, see “Issue Procedure” on page 110. The distribution of this Preliminary Placement Document or the disclosure of its contents to any person, other
than QIBs and persons retained by QIBs to advise them with respect to their purchase of the Equity Shares, is unauthorised and prohibited. Each prospective investor, by accepting
delivery of this Preliminary Placement Document, agrees to observe the foregoing restrictions and to make no copies of this Preliminary Placement Document or any documents
referred to in this Preliminary Placement Document.
A copy of this Preliminary Placement Document (which includes disclosures prescribed under Form PAS-4 under the Companies (Prospectus and Allotment of Securities) Rules,
2014, as amended) has been delivered to BSE Limited (“BSE”) and the National Stock Exchange of India Limited (“NSE” and, together with BSE, the “Stock Exchange”). Our
Company shall also make the requisite filings with the Registrar of Companies, Mumbai (the “RoC”) and the Securities Exchange Board of India (“SEBI”) within the stipulated
period as required under the Companies Act, 2013 and the Companies (Prospectus and Allotment of Securities) Rules, 2014. This Preliminary Placement Document has not been
reviewed by the SEBI, the Reserve Bank of India (”RBI”), the Stock Exchange or any other regulatory or listing authority and is intended only for use by QIBs. This Preliminary
Placement Document has not been and will not be registered as a prospectus with the RoC, and will not be circulated or distributed to the public in India or any other jurisdiction and
will not constitute a public offer in India or any other jurisdiction. The Issue is meant only for QIBs by way of a private placement and is not an offer to the public or to any other
class of investors.
INVESTMENTS IN THE EQUITY SHARES INVOLVE A HIGH DEGREE OF RISK AND PROSPECTIVE INVESTORS SHOULD NOT INVEST ANY FUNDS IN
THIS ISSUE UNLESS THEY ARE PREPARED TO TAKE THE RISK OF LOSING ALL OR PART OF THEIR INVESTMENTS. PROSPECTIVE INVESTORS ARE
ADVISED TO READ “RISK FACTORS” ON PAGE 33 CAREFULLY BEFORE TAKING AN INVESTMENT DECISION IN THIS ISSUE. EACH PROSPECTIVE
INVESTOR IS ADVISED TO CONSULT ITS ADVISORS ABOUT THE PARTICULAR CONSEQUENCES TO IT OF AN INVESTMENT IN THE EQUITY SHARES
BEING ISSUED PURSUANT TO THIS PRELIMINARY PLACEMENT DOCUMENT.
The information on our Company’s website or any website directly or indirectly linked to our Company’s website does not form part of this Preliminary Placement Document and
prospective investors should not rely on such information contained in, or available through, such websites.
All of our Company’s outstanding Equity Shares are listed on the Stock Exchanges. The closing price of the outstanding Equity Shares on the BSE and the NSE on June 27, 2016
was Rs. 89.30 and Rs. 88.80 per Equity Share, respectively. In-principle approval under Regulation 28(1) of the Listing Regulations (as defined below) for listing of the Equity
Shares has been received from BSE and NSE on June 28, 2016. Application to the Stock Exchanges will be made for obtaining listing and trading approval for the Equity Shares
offered through this Preliminary Placement Document. The Stock Exchanges assume no responsibility for the correctness of any statements made, opinions expressed or reports
contained herein. Admission of the Equity Shares to trading on the Stock Exchanges should not be taken as an indication of the merits of our business or the Equity Shares.
YOU ARE NOT AUTHORISED TO (1) DELIVER THIS PRELIMINARY PLACEMENT DOCUMENT TO ANY OTHER PERSON; (2) REPRODUCE THIS
PRELIMINARY PLACEMENT DOCUMENT IN ANY MANNER WHATSOEVER; OR (3) RELEASE ANY PUBLIC ADVERTISEMENTS OR UTILISE ANY
MEDIA, MARKETING OR DISTRIBUTION CHANNELS OR AGENTS TO INFORM THE PUBLIC AT LARGE ABOUT THE ISSUE. ANY DISTRIBUTION OR
REPRODUCTION OF THIS DOCUMENT IN WHOLE OR IN PART IS UNAUTHORISED. FAILURE TO COMPLY WITH THIS INSTRUCTION MAY RESULT
IN A VIOLATION OF APPLICABLE LAWS OF INDIA AND OTHER JURISDICTIONS.
THIS PRELIMINARY PLACEMENT DOCUMENT HAS BEEN PREPARED BY OUR COMPANY SOLELY FOR PROVIDING INFORMATION IN CONNECTION
WITH THE PROPOSED ISSUE OF THE EQUITY SHARES DESCRIBED IN THIS PRELIMINARY PLACEMENT DOCUMENT.
The Equity Shares have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”), or any state securities laws of the United
States, and may not be offered, sold or delivered within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of
the U.S. Securities Act and applicable U.S. state securities laws. Accordingly, the Equity Shares are being offered and sold outside the United States in offshore transactions in
reliance on Regulation S under the U.S. Securities Act (“Regulation S”). See “Selling Restrictions” and “Transfer Restrictions” on page 122 and page 127, respectively.
This Preliminary Placement Document is dated June 28, 2016
BOOK RUNNING LEAD MANAGER
Equirus Capital Private Limited
TABLE OF CONTENTS
NOTICE TO INVESTORS .................................................................................................................................. 1
REPRESENTATIONS BY INVESTORS .......................................................................................................... 3
DISCLAIMER CLAUSE OF THE STOCK EXCHANGE .............................................................................. 9
PRESENTATION OF FINANCIAL AND OTHER DATA ........................................................................... 10
MARKET AND INDUSTRY DATA................................................................................................................. 11
FORWARD LOOKING STATEMENTS ........................................................................................................ 12
ENFORCEMENT OF CIVIL LIABILITIES .................................................................................................. 13
EXCHANGE RATES ......................................................................................................................................... 14
DEFINITIONS AND ABBREVIATIONS ........................................................................................................ 15
DISCLOSURE REQUIREMENTS UNDER FORM PAS-4 PRESCRIBED UNDER THE COMPANIES
ACT, 2013 ............................................................................................................................................................ 21
SUMMARY OF BUSINESS .............................................................................................................................. 23
SUMMARY OF THE ISSUE ............................................................................................................................ 28
SUMMARY FINANCIAL INFORMATION ................................................................................................... 30
RISK FACTORS ................................................................................................................................................ 33
MARKET PRICE INFORMATION ................................................................................................................ 53
USE OF PROCEEDS ......................................................................................................................................... 55
CAPITALISATION ........................................................................................................................................... 56
CAPITAL STRUCTURE ................................................................................................................................... 57
DIVIDEND POLICY ......................................................................................................................................... 60
INDUSTRY OVERVIEW .................................................................................................................................. 61
BUSINESS ........................................................................................................................................................... 71
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS .................................................................................................................................................... 84
REGULATIONS AND POLICIES ................................................................................................................... 97
BOARD OF DIRECTORS AND SENIOR MANAGEMENT ...................................................................... 101
PRINCIPAL SHAREHOLDERS AND OTHER INFORMATION ............................................................ 108
ISSUE PROCEDURE ...................................................................................................................................... 110
PLACEMENT AGREEMENT........................................................................................................................ 120
SELLING RESTRICTIONS ........................................................................................................................... 122
TRANSFER RESTRICTIONS ........................................................................................................................ 127
THE SECURITIES MARKET OF INDIA..................................................................................................... 128
DESCRIPTION OF EQUITY SHARES ........................................................................................................ 131
INDEPENDENT AUDITORS ......................................................................................................................... 136
STATEMENT OF TAX BENEFITS............................................................................................................... 137
LEGAL PROCEEDINGS ................................................................................................................................ 152
GENERAL INFORMATION .......................................................................................................................... 155
FINANCIAL INFORMATION ....................................................................................................................... 157
DECLARATION .............................................................................................................................................. 158
NOTICE TO INVESTORS
Our Company has furnished and accepts full responsibility for all the information contained in this Preliminary
Placement Document and confirms that, to the best of our knowledge and belief, having made all reasonable
enquiries, the Preliminary Placement Document contains all information with respect to us and the Equity Shares
which is material in the context of this Issue. The statements contained in this Preliminary Placement Document
relating to us and the Equity Shares are, in all material respects, true and accurate and not misleading. The opinions
and intentions expressed in this Preliminary Placement Document with regard to us and the Equity Shares are
honestly held, have been reached after considering all relevant circumstances, are based on information presently
available to us and are based on reasonable assumptions. There are no other facts in relation to us and the Equity
Shares, the omission of which would, in the context of this Issue, make any statement in this Preliminary
Placement Document misleading in any material respect. Further, all reasonable enquiries have been made by us
to ascertain such facts and to verify the accuracy of all such information and statements.
The Book Running Lead Manager (“BRLM”) has made reasonable enquiries but has not separately verified all
of the information contained in this Preliminary Placement Document (financial, legal or otherwise). Accordingly,
neither the BRLM nor any of its respective affiliates including any of its respective shareholders, directors,
officers, employees, counsel, representatives, agents or affiliates make any express or implied representation,
warranty or undertaking, and no responsibility or liability is accepted by the BRLM or any of their respective
shareholders, directors, officers, employees, counsel, representatives, agents or affiliates as to the accuracy or
completeness of the information contained in this Preliminary Placement Document or any other information
supplied in connection with the Equity Shares. Each person receiving this Preliminary Placement Document
acknowledges that such person has not relied on the BRLM or any of their respective affiliates including any of
their respective shareholders, directors, officers, employees, counsel, representatives, agents or affiliates in
connection with such person’s investigation of the accuracy of such information or such person’s investment
decision, and each such person must rely on its own examination of us and the merits and risks involved in
investing in the Equity Shares. Prospective investors should not construe the contents of this Preliminary
Placement Document as legal, tax, accounting or investment advice.
No person is authorised to give any information or to make any representation not contained in this Preliminary
Placement Document and any information or representation not so contained must not be relied upon as having
been authorised by or on behalf of us or the BRLM. The delivery of this Preliminary Placement Document at any
time does not imply that the information contained in it is correct as at any time subsequent to its date.
The Equity Shares have not been approved, disapproved or recommended by any regulatory authority in
any jurisdiction. No authority has passed on or endorsed the merits of this Issue or the accuracy or
adequacy of this Preliminary Placement Document. Any representation to the contrary may be a criminal
offence in certain jurisdictions.
The distribution of this Preliminary Placement Document and the issuance of Equity Shares pursuant to this Issue
may be restricted by law in certain jurisdictions. The Equity Shares have not been recommended by any foreign,
federal or state securities commission or regulatory authority. As such, this Preliminary Placement Document
does not constitute, and may not be used for or in connection with, an offer or solicitation by any one in any
jurisdiction in which such offer or solicitation is not authorised or to any person to whom it is unlawful to make
such offer or solicitation. In particular, no action has been taken by our Company and the BRLM which would
permit an issue of the Equity Shares or distribution of this Preliminary Placement Document in any jurisdiction,
other than India, where action for that purpose is required. Accordingly, the Equity Shares may not be offered or
sold, directly or indirectly, and neither this Preliminary Placement Document nor any other Issue-related materials
in connection with the Equity Shares may be distributed or published in or from any country or jurisdiction, except
under circumstances that will result in compliance with any applicable rules and regulations of any such country
or jurisdiction.
The Equity Shares have not been and will not be registered under the U.S. Securities Act of 1933, as amended
(the “U.S. Securities Act”), or any state securities laws of the United States and may not be offered, sold or
delivered within the United States except pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the U.S. Securities Act and applicable U.S. state securities laws. Accordingly, the
Equity Shares are being offered and sold outside the United States in offshore transactions in reliance on
Regulation S under the U.S. Securities Act (“Regulation S”). The Equity Shares are transferable only in
accordance with the restrictions described in “Selling Restrictions” and “Transfer Restrictions” on page 122 and
127, respectively. Purchaser of the Equity Shares will be deemed to make the representations, warranties,
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acknowledgments and agreements set forth in the sections “Representations by Investors”, “Selling Restrictions”
and “Transfer Restrictions”.
The distribution of this Preliminary Placement Document or the disclosure of its contents without the prior consent
of the Company to any person, other than QIBs whose names are recorded by our Company prior to the invitation
to subscribe to the Issue, in consultation with the BRLM or its representatives, and those retained by QIBs to
advise them with respect to their purchase of the Equity Shares is unauthorised and prohibited. Each prospective
investor, by accepting delivery of this Preliminary Placement Document, agrees to observe the foregoing
restrictions and to make no copies of this Preliminary Placement Document or any documents referred to in this
Preliminary Placement Document.
As such, this Preliminary Placement Document does not constitute, and may not be used for, or in connection
with, an offer or solicitation by any one in any jurisdiction in which such offer or solicitation is not authorised or
to any person to whom it is unlawful to make such offer or solicitation. In particular, no action has been taken by
us or the BRLM which would permit an Issue of the Equity Shares or distribution of this Preliminary Placement
Document in any jurisdiction, other than India, where action for that purpose is required. Accordingly, the Equity
Shares may not be offered or sold, directly or indirectly, and neither this Preliminary Placement Document nor
any other Issue related materials in connection with the Equity Shares may be distributed or published, in or from
any country or jurisdiction except under circumstances that will be in compliance with any applicable rules and
regulations of any such country or jurisdiction.
In making an investment decision, prospective investors must rely on their own examination of us and the terms
of this Issue, including the merits and risks involved. Investors should not construe the contents of this Preliminary
Placement Document as legal, tax, accounting or investment advice. Investors should consult their own counsel
and advisors as to business, legal, tax, accounting and related matters concerning the Issue. In addition, neither
we nor the BRLM are making any representation to any offeree or purchaser of the Equity Shares regarding the
legality of an investment in the Equity Shares by such offeree or purchaser under applicable legal, investment or
similar laws or regulations.
Each purchaser of the Equity Shares in this Issue is deemed to have acknowledged, represented and agreed
that it is eligible to invest in India and in the Equity Shares under Indian law, including Chapter VIII of
the SEBI ICDR Regulations and is not prohibited by SEBI or any other statutory authority from buying,
selling or dealing in securities including Equity Shares. Each purchaser of Equity Shares in this Issue also
acknowledges that it has been afforded an opportunity to request from us and has reviewed information
relating to us and the Equity Shares.
The information on our website, www.camlinfs.com, or any website directly or indirectly linked to our website
or on the respective websites of the BRLM or their respective affiliates or any website directly or indirectly linked
to such websites does not constitute or form a part of this Preliminary Placement Document. Prospective investors
should not rely on the information contained in, or available through, any such websites.
This Preliminary Placement Document contains a summary of some terms of certain documents which are
qualified in their entirety by the terms and conditions of those documents.
For information in certain other jurisdictions, see “Selling Restrictions” and “Transfer Restrictions” on page 122
and 127, respectively.
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REPRESENTATIONS BY INVESTORS
All references to “you” or “your” in this section are to the prospective investors in this Issue. By bidding for and
subscribing to any of the Equity Shares in this Issue, you are deemed to have represented, warranted,
acknowledged and agreed to us and the BRLM as follows:
(a)
you (i) are a QIB as defined in this Preliminary Placement Document and are not excluded pursuant to
Regulation 86(1)(b) of the SEBI ICDR Regulations; (ii) have a valid and existing registration under
applicable laws of India (as applicable); and (iii) undertake to acquire, hold, manage or dispose of any
Equity Shares that are Allocated to you for the purposes of your business in accordance with Chapter
VIII of the SEBI ICDR Regulations and undertake to comply with the SEBI ICDR Regulations, the
Companies Act, 2013, the Companies Act, 1956 to the extent applicable and all other applicable laws,
including in respect of reporting requirements, if any;
(b)
if you are not a resident of India, but a QIB, (i) you are an Eligible FPI as defined in this Preliminary
Placement Document including a FII (including a sub-account other than a sub-account which is a foreign
corporate or a foreign individual) have a valid and existing registration with SEBI under the applicable
laws in India; or (ii) a multilateral or bilateral development financial institution or (iii) an FVCI and have
a valid and existing registration with SEBI under applicable laws in India. Further, you are aware and
understand that non-resident QIBs may only invest in the Issue under the portfolio investment scheme
pursuant to Schedule 2 and 2A of FEMA 20. You will make all necessary filings with appropriate
regulatory authorities, including the RBI, as required pursuant to applicable laws.
(c)
you are eligible to invest in India under applicable laws, including the Foreign Exchange Management
(Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000, as amended and
any notification, circulars or clarification issued thereunder, and have not been prohibited by SEBI or
any other regulatory authority from buying, selling or dealing in securities;
(d)
you will make all necessary filings with the appropriate regulatory authorities including with the RBI, as
required, pursuant to applicable laws;
(e)
if you are Allotted Equity Shares pursuant to this Issue, you shall not, for a period of one year from the
date of Allotment, sell the Equity Shares so acquired except on the Stock Exchanges;
(f)
you are aware that this Preliminary Placement Document has not been, and will not be, registered as a
prospectus under the Companies Act, 2013 and the SEBI ICDR Regulations or under any other law in
force in India. You are aware that this Preliminary Placement Document has not been reviewed or
affirmed by SEBI, RBI or the Stock Exchanges or any other regulatory or listing authority and is intended
for use only by QIBs. This Preliminary Placement Document has been filed (and the Placement
Document will be filed) with the Stock Exchanges for record purposes only and this Preliminary
Placement Document has been displayed (and the Placement Document will be displayed) on the
websites of our Company and the Stock Exchanges;
(g)
you are entitled and have necessary capacity to acquire/subscribe for the Equity Shares under the laws
of all relevant jurisdictions which apply to you and that you have fully observed such laws and obtained
all such governmental and other consents in each case which may be required there under and complied
with all necessary formalities and have obtained all necessary consents and authorities to enable you to
commit to participation in this Issue and to perform your obligations in relation thereto (including, in the
case of any person on whose behalf you are acting, all necessary consents and authorisations to agree to
the terms set out or referred to in this Preliminary Placement Document), and will honour such
obligations;
(h)
neither we nor the BRLM nor any of their respective shareholders, directors, officers, employees,
counsel, representatives, agents or affiliates is making any recommendation to you or, advising you
regarding the suitability of any transactions it may enter into in connection with this Issue; your
participation in this Issue is on the basis that you are not, and will not, up to Allotment, be a client of the
BRLM and that neither the BRLM nor any of their respective shareholders, directors, officers,
employees, counsel, representatives, agents or affiliates have any duty or responsibilities to you for
providing the protection afforded to their clients or customers for providing advice in relation to this
Issue and are not in any way acting in any fiduciary capacity;
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(i)
you confirm that, either: (i) you have not participated in or attended any investor meetings or
presentations by us or our agents (“Company Presentations”) with regard to us or this Issue; or (ii) if
you have participated in or attended any Company Presentations: (a) you understand and acknowledge
that the BRLM may not have knowledge of the statements that we or its agents may have made at such
Company Presentations and are therefore unable to determine whether the information provided to you
at such Company Presentations may have included any material misstatements or omissions, and,
accordingly you acknowledge that the BRLM has advised you not to rely in any way on any information
that was provided to you at such Company Presentations, and (b) confirm that you have not been provided
any material information that was not publicly available;
(j)
you are aware and understand that the Equity Shares are being offered only to QIBs and are not being
offered to the general public and the allotment of the Equity Shares shall be on a discretionary basis at
the discretion of our Company in consultation with the BRLM;
(k)
all statements other than statements of historical fact included in this Preliminary Placement Document,
including, without limitation, those regarding our financial position, business strategy, plans and
objectives of management for future operations (including development plans and objectives relating to
our products), are forward-looking statements. Such forward-looking statements involve known and
unknown risks, uncertainties and other important factors that could cause actual results to be materially
different from future results, performance or achievements expressed or implied by such forward-looking
statements. Such forward-looking statements are based on numerous assumptions regarding our present
and future business strategies and environment in which we will operate in the future. You should not
place reliance on forward looking statements, which speak only as at the date of this Preliminary
Placement Document. We assume no responsibility to update any of the forward-looking statements
contained in this Preliminary Placement Document;
(l)
you have been provided a serially numbered copy of this Preliminary Placement Document and have
read this Preliminary Placement Document in its entirety including, in particular “Risk Factors” on page
33;
(m)
in making your investment decision (i) you have relied on your own examination of our Company and
the terms of this Issue, including the merits and risks involved; (ii) you have made your own assessment
of our Company, the Equity Shares and the terms of this Issue based solely on the information contained
in this Preliminary Placement Document and no other representation by us or any other party; (iii) you
have consulted your own independent advisors (including tax advisors) or otherwise have satisfied
yourself concerning, without limitation, the effects of local laws and taxation matters; (iv) you have relied
solely on the information contained in this Preliminary Placement Document and no other disclosure or
representation by us or the BRLM or any other party; (v) you have received all information that you
believe is necessary or appropriate in order to make an investment decision in respect of us and the Equity
Shares; and (vi) relied upon your investigation and resources in deciding to invest in this Issue. You are
seeking to subscribe to/acquire the Equity shares in this Issue for your own investment and not with a
view to resale or distribution;
(n)
you are a sophisticated investor and have such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of the investment in the Equity Shares and you
and any accounts for which you are subscribing to the Equity Shares: (i) are each able to bear the
economic risk of the investment in the Equity Shares; (ii) will not look to us, the BRLM or its respective
shareholders, directors, officers, employees, counsel, representatives, agents or affiliates for all or part
of any such loss or losses that may be suffered including losses arising out of non-performance by our
Company of any of its respective obligations or any breach of any representations and warranties by our
Company, whether to you or otherwise; (iii) are able to sustain a complete loss on the investment in the
Equity Shares; (iv) have no need for liquidity with respect to the investment in the Equity Shares; and
(v) have no reason to anticipate any change in your or their circumstances, financial or otherwise, which
may cause or require any sale or distribution by you or them of all or any part of the Equity Shares;
(o)
neither the BRLM nor any of its shareholders, investors, officers, employees, counsel, agents,
representatives or affiliates have provided you with any tax advice or otherwise made any representations
regarding the tax consequences of purchase, ownership or disposal of the Equity Shares (including, but
not limited, to this Issue and the use of the proceeds from the Equity Shares). You will obtain your own
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independent tax advice from a reputable service provider and will not rely on the BRLM or any of its
shareholders, investors, officers, employees, counsel, agents, representatives or affiliates when
evaluating the tax consequences of the Equity Shares (including, but not limited to, this Issue and the use
of the proceeds from the Equity Shares). You waive and agree not to assert any claim against us, the
BRLM or any of its shareholders, investors, officers, employees, counsel, agents, representatives or
affiliates with respect to the tax aspects of the Equity Shares or as a result of any tax audits by tax
authorities, wherever situated;
(p)
where you are acquiring the Equity Shares for one or more managed accounts, you represent and warrant
that you are authorised in writing, by each such managed account to acquire the Equity Shares for each
managed account and to make (and you hereby make) the representations, warranties, acknowledgements
and agreements herein for and on behalf of each such account, reading the reference to “you” to include
such accounts;
(q)
you agree and acknowledge that in terms of Section 42(7) of the Companies Act, 2013, we shall file the
list of QIBs (to whom this Preliminary Placement Document are circulated) along with other particulars
with the RoC and SEBI within 30 days of circulation of the Preliminary Placement Document and other
filings required under the Companies Act, 2013;
(r)
you are not a ‘Promoter’ of our Company, as defined under section 2(69) of the Companies Act, 2013
and the SEBI ICDR Regulations, and are not a person related to the Promoter or to group companies of
the Promoter, either directly or indirectly and your Bid does not directly or indirectly represent the
Promoter or Promoter Group or persons related to the Promoter of our Company or to group companies
of the Promoter of our Company;
(s)
you have no rights under a shareholders’ agreement or voting agreement with the Promoter or persons
related to the Promoter, no veto rights or right to appoint any nominee director on the Board of Directors
of our Company other than such rights acquired, if any, in the capacity of a lender not holding any Equity
Shares of our Company, the acquisition of which shall not deem you to be a Promoter, a person related
to the Promoter;
(t)
you have no right to withdraw your Bid after the Issue Closing Date;
(u)
you are eligible to Bid and hold the Equity Shares so Allotted together with any Equity Shares held by
you prior to this Issue. You further confirm that your aggregate holding upon this Issue of the Equity
Shares shall not exceed the level permissible as per any applicable regulations;
(v)
the Bid submitted by you would not eventually result in triggering a tender offer under the Securities and
Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, as
amended;
(w)
your aggregate holding, together with other QIBs participating in this Issue that belong to the same group
or are under common control as you, pursuant to the Allotment under the present Issue, shall not exceed
50% of this Issue. For the purposes of this representation:
(a)
the expression “belongs to the same group” shall be interpreted by applying the concept of
“companies under the same group” as provided in sub-section (11) of Section 372 of the
Companies Act, 1956; and
(b)
“Control” shall have the same meaning as is assigned to it under Regulation 2 (i)(e) of the
Takeover Code;
(x)
you shall not undertake any trade in the Equity Shares credited to your beneficiary account until such
time that the final listing and trading approval for the Equity Shares is issued by the Stock Exchanges;
(y)
you are aware that the pre-issue and post-issue shareholding pattern of our Company, as required by the
Listing Regulations will be filed by our Company with the Stock Exchanges, and if you are Allotted
more than 5.00% of the Equity Shares in this Issue, we shall be required to disclose your name and the
number of Equity Shares Allotted to you to the Stock Exchanges and the Stock Exchanges will make the
same available on their website and you consent to such disclosure being made by us;
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(z)
you are aware that our Company shall make necessary filings with the RoC pursuant to the Allotment
(which shall include certain details such as your name, address and number of Equity Shares Allotted)
and if the Allotment of Equity Shares in the Issue results in you being one of the top ten shareholders of
our Company, we shall also be required to disclose your name and shareholding details to the RoC within
15 days of Allotment, and you consent to such disclosure being made by us;
(aa)
you are aware that (i) applications for in-principle approval, in terms of Regulation 28(1) of the Listing
Regulations, for listing and admission of the Equity Shares and for trading on the Stock Exchanges, were
made and an approval has been received from the Stock Exchanges, and (ii) the application for the listing
and trading approval will be made only after Allotment. There can be no assurance that the approvals for
listing and trading in the Equity Shares will be obtained in time or at all. We shall not be responsible for
any delay or non-receipt of such approvals for listing and trading or any loss arising from such delay or
non-receipt;
(bb)
you are aware and understand that the BRLM will have entered into a placement agreement with our
Company (the “Placement Agreement”) whereby the BRLM has, subject to the satisfaction of certain
conditions set out therein, undertaken severally and not jointly to use their reasonable endeavours to seek
to procure subscriptions for the Equity Shares on the terms and conditions set forth herein;
(cc)
the contents of this Preliminary Placement Document are our exclusive responsibility and neither the
BRLM nor any person acting on their behalf, nor any of their respective shareholders, directors, officers,
employees, counsel, advisors, representatives, agents or affiliates has, or shall have, any liability for any
information, representation or statement contained in this Preliminary Placement Document or any
information previously published by or on behalf of us and will not be liable for your decision to
participate in this Issue based on any information, representation or statement contained in this
Preliminary Placement Document or otherwise. By accepting a participation in this Issue, you agree and
confirm that you have neither received nor relied on any other information, representation, warranty or
statement made by or on behalf of either of the BRLM or us or any other person and neither the BRLM,
nor we or our respective directors, officers, employees, counsel, advisors, representatives, agents or
affiliates or any other person will be liable for your decision to participate in this Issue based on any
other information, representation, warranty or statement that you may have obtained or received;
(dd)
the only information you are entitled to rely on, and on which you have relied in committing yourself to
acquire the Equity Shares, is contained in this Preliminary Placement Document, such information being
all that you deem necessary to make an investment decision in respect of the Equity Shares issued in
pursuance of this Issue and that you have neither received nor relied on any other information given or
representations, warranties or statements made by BRLM (including any view, statement, opinion or
representation expressed in any research published or distributed by the BRLM or its affiliates or any
view, statement, opinion or representation expressed by any staff (including research staff) of the BRLM
or its respective affiliates) or our Company or any of their respective shareholders, directors, officers,
employees, counsel, advisors, representatives, agents or affiliates and neither the BRLM nor our
Company or any of their respective shareholders, directors, officers, employees, counsel, advisors,
representatives, agents or affiliates will be liable for your decision to accept an invitation to participate
in the Issue based on any other information, representation, warranty, statement or opinion;
(ee)
you understand that neither the BRLM nor its affiliates have any obligation to purchase or acquire all or
any part of the Equity Shares purchased by you in this Issue or to support any losses directly or indirectly
sustained or incurred by you for any reason whatsoever in connection with this Issue, including nonperformance by us of any of our obligations or any breach of any representations or warranties by us,
whether to you or otherwise;
(ff)
you agree to indemnify and hold us and the BRLM and its respective affiliates harmless from any and
all costs, claims, liabilities and expenses (including legal fees and expenses) arising out of or in
connection with any breach of the representations, warranties, acknowledgements and agreements made
by you in this Preliminary Placement Document. You agree that the indemnity set forth in this section
shall survive the resale of the Equity Shares by, or on behalf of, the managed accounts;
6
(gg)
each of the representations, warranties, acknowledgements and agreements set forth above shall continue
to be true and accurate at all times up to and including the Allotment and listing and trading of the Equity
Shares on the Stock Exchanges;
(hh)
we, the BRLM, its respective affiliates and others will rely on the truth and accuracy of the foregoing
representations, warranties, acknowledgements, undertakings and agreements which are given to the
BRLM on its own behalf and on behalf of us and are irrevocable and it is agreed that if any of such
representations, warranties, acknowledgements, undertakings and agreements are no longer accurate, you
will promptly notify to the BRLM;
(ii)
you are a sophisticated investor who is seeking to purchase the Equity Shares for your own investment
and not with a view to distribution. In particular, you acknowledge that (i) an investment in the Equity
Shares involves a high degree of risk and that the Equity Shares are, therefore, a speculative investment,
(ii) you have sufficient knowledge, sophistication and experience in financial and business matters so as
to be capable of evaluating the merits and risk of the purchase of the Equity Shares, and (iii) you are
experienced in investing in private placement transactions of securities of companies in a similar stage
of development and in similar jurisdictions and have such knowledge and experience in financial,
business and investment matters that you are capable of evaluating the merits and risks of your investment
in the Equity Shares;
(jj)
you understand that the Equity Shares have not been and will not be registered under the U.S. Securities
Act or with any securities regulatory authority of any state of the United States, and accordingly, may
not be offered, sold or delivered within the United States, except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the U.S. Securities Act, and that the Equity
Shares are only being offered and sold outside the United States in offshore transactions in reliance on
Regulation S of the U.S. Securities Act;
(kk)
any dispute arising in connection with this Issue will be governed by and construed in accordance with
the laws of the Republic of India and the courts at Mumbai, India shall have exclusive jurisdiction to
settle any disputes which may arise out of or in connection with this Preliminary Placement Document
and the Placement Document; and
(ll)
you have made, or been deemed to have made, as applicable, the representations, warranties,
acknowledgments and agreements set forth in this section and in “Selling Restriction” and “Transfer
Restrictions” on page 122 and 127, respectively.
Off-Shore Derivative Instruments (P-Notes)
Subject to compliance with all applicable Indian laws, rules, regulations, guidelines and approvals in terms of
Regulation 22 of the SEBI (FPI) Regulations, a FPI (other than a Category III foreign portfolio investors and
unregulated broad based funds which are classified as Category II FPI by virtue of their investment manager being
appropriately regulated), including the affiliates of the BRLM, may issue, subscribe or otherwise deal in offshore
derivative instruments as defined under the SEBI (FPI) Regulations as any instrument, by whatever name called,
which is issued overseas by a FPI against securities held by it that are listed or proposed to be listed on any
recognised stock exchange in India, as its underlying and all such offshore derivative instruments are referred to
herein as “P-Notes” for which they may receive compensation from the purchasers of such P-Notes. These PNotes may be issued only in favour of those entities which are regulated by any appropriate foreign regulatory
authorities in the countries of their incorporation or establishment subject to compliance with “know your client”
requirements. An FPI must ensure that the P-Notes are issued in compliance with all applicable laws including
Regulation 22 of the SEBI (FPI) Regulations and circular no. CIR/IMD/FIIC/20/2014 dated November 24, 2014
issued by SEBI. P-Notes have not been and are not being offered or sold pursuant to this Preliminary Placement
Document. This Preliminary Placement Document does not contain any information concerning P-Notes,
including, without limitation, any information regarding any risk factors relating thereto.
Any P-Notes that may be issued are not securities of our Company and do not constitute any obligations of, claim
on, or interests in our Company. Our Company has not participated in any offer of any P-Notes, or in the
establishment of the terms of any P-Notes, or in the preparation of any disclosure related to any P-Notes. Any PNotes that may be offered are issued by, and are solely the obligations of, third parties that are unrelated to our
Company. Our Company and the BRLM do not make any recommendation as to any investment in P-Notes and
do not accept any responsibility whatsoever in connection with any P-Notes. Any P-Notes that may be issued are
7
not securities of the BRLM and do not constitute any obligations of, or claims on, the BRLM. FPI affiliates (other
than Category III FPI and unregulated broad based funds which are classified as FPI by virtue of their investment
manager being appropriately regulated) of the BRLM may purchase, to the extent permissible under law, Equity
Shares in this Issue, and may issue P-Notes in respect thereof.
Prospective investors interested in purchasing any P-Notes have the responsibility to obtain adequate
disclosure as to the issuer(s) of such P-Notes and the terms and conditions of any such P-Notes from the
issuer(s) of such P-Notes. Neither SEBI nor any other regulatory authority has reviewed or approved any
P-Notes or any disclosure related thereto. Prospective investors are urged to consult with their own
financial, legal, accounting and tax advisors regarding any contemplated investment in P-Notes, including
whether P-Notes are issued in compliance with applicable laws and regulations.
8
DISCLAIMER CLAUSE OF THE STOCK EXCHANGE
As required, a copy of this Preliminary Placement Document has been submitted to the Stock Exchanges. The
Stock Exchanges do not in any manner:
1.
warrant, certify or endorse the correctness or completeness of any of the contents of this Preliminary
Placement Document;
2.
warrant that the Equity Shares issued pursuant to this Issue will be listed or will continue to be listed on
the Stock Exchanges; or
3.
take any responsibility for the financial or other soundness of our Company, our Promoters, its
management or any scheme or project of our Company.
It should not for any reason be deemed or construed to mean that this Preliminary Placement Document has been
cleared or approved by the Stock Exchanges. Every person who desires to apply for or otherwise acquires any
Equity Shares may do so pursuant to an independent inquiry, investigation and analysis and shall not have any
claim against the Stock Exchanges whatsoever by reason of any loss which may be suffered by such person
consequent to, or in connection with, such subscription/acquisition whether by reason of anything stated or omitted
to be stated herein or for any other reason whatsoever.
9
PRESENTATION OF FINANCIAL AND OTHER DATA
In this Preliminary Placement Document, unless the context otherwise indicates or implies references to:

“you”, “your”, “offeree”, “purchaser”, “subscriber”, “recipient”, “investors” and “potential investor” are
to the prospective investors in the Equity Shares issued pursuant to this Issue;

unless otherwise specified, “we”, “us” and “our” refers to Camlin Fine Sciences Limited and its
Subsidiaries on a consolidated basis; and

unless otherwise specified, “our Company”, “the Company” and “the Issuer” refers to Camlin Fine
Sciences Limited on a standalone basis.
References in this Preliminary Placement Document to “India” are to the Republic of India and its territories and
possessions and the “Government” or the “Central Government” or the “State Government” are to the Government
of India, Central or State, as applicable. All references herein to the “U.S.”, “USA” or the “United States” are to
the United States of America and its territories and possessions.
Currency and Units of Presentation
In this Preliminary Placement Document, all references to:







“BRL” are to Brazilian Real, the official currency of Brazil;
“CAD” are to Canadian Dollar, the official currency of Canada;
“Euro” or “€” are to official currency of member states of the European Union;
“MUR” are to Mauritian Rupee, the official currency of Mauritius;
“MXN” are to Mexican Peso, the official currency of Mexico;
“Rs.” or “Rupees” are to Indian Rupees, the official currency of the Republic of India; and
“USD” or “US$” are to United States Dollars, the official currency of the United States of America.
Financial Data
Our Company publishes its financial statements in Indian Rupees. Our Company prepares its financial statements
in accordance with Indian Generally Accepted Accounting Principles (“Indian GAAP”). Indian GAAP differs in
certain respects from International Financial Reporting Standards (“IFRS”) and U.S. Generally Accepted
Accounting Principles (“U.S. GAAP”). We do not provide a reconciliation of our financial statements to IFRS or
U.S. GAAP. We also do not provide a summary of differences between Indian GAAP, IFRS and U.S. GAAP.
Each of U.S. GAAP and IFRS differs in significant respects from Indian GAAP. Accordingly, the degree to which
the financial statements prepared in accordance with Indian GAAP included in this Preliminary Placement
Document will provide meaningful information is entirely dependent on the reader’s level of familiarity with the
respective accounting practices. Any reliance by persons not familiar with Indian accounting practices on the
financial disclosures presented in this Preliminary Placement Document should accordingly be limited and we
urge you to consult your own advisors regarding such differences and their impact on the financial data.
In this Preliminary Placement Document, certain monetary thresholds have been subject to rounding adjustments;
accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures which
precede them.
Unless the context requires otherwise, the financial data in this Preliminary Placement Document is derived from
our Financial Statements. Our Financial Year commences on April 1 of each year and ends on March 31 of the
succeeding year, so all references to a particular “Fiscal Year”, “Fiscal”, “Financial Year” or “FY” are to the 12
month period ended on March 31 of that year. Our Audited Consolidated Financial Statements that appear in this
Preliminary Placement Document have been prepared by our Company in accordance with Indian GAAP.
References to the singular also refer to the plural and one gender also refers to any other gender, wherever
applicable. Our Company has presented certain numerical information in this Placement Document in “lakh”
units. One lakh represents 100,000 and one crore represents 10,000,000.
10
MARKET AND INDUSTRY DATA
Information regarding market size, market share, market position, growth rates and other industry data pertaining
to our business contained in this Preliminary Placement Document consists of estimates based on data reports
compiled by governmental bodies, professional organisations and analysts and/or data from other external sources.
Statistical information, industry and market data used throughout this Preliminary Placement Document has been
obtained primarily from the reports titled 1) “Global Antioxidants Market”, 2014-2018 and an additional report
by TechNavio Insights (the “TechNavio Report”); 2) A Report on Chemical Industry” by FICCI 2015; 3)
Handbook on Indian Chemicals and Petrochemicals Sector, October 2014” published by FICCI and 4)
“Hydroquinone and Pyrocatechol, World Markets & Prospects, 2014-2019” by Rabih SROUR.
TechNavio Insights has taken due care and caution in preparing the TechNavio Report based on the information
obtained by TechNavio Insights from sources which it considers reliable. However, TechNavio Insights does not
guarantee the accuracy, adequacy or completeness of information in the TechNavio Report or the TechNavio
Report itself and is not responsible for any errors or omissions or for the results obtained from the use of
information in the TechNavio Report or the TechNavio Report itself. The TechNavio Report is not a
recommendation to invest/disinvest in any company covered in the TechNavio Report. TechNavio Insights is not
liable for investment decisions which may be based on the views expressed in the TechNavio Report. The views
expressed in this TechNavio Report are that of TechNavio Insights.
We have not commissioned any report for purposes of the Preliminary Placement Document. Industry publications
generally state that the information contained in those publications has been obtained from sources believed to be
reliable but that their accuracy and completeness are not guaranteed and their reliability cannot be assured.
Accordingly, no investment decision should be made on the basis of such information. Although we believe that
industry data used in this Preliminary Placement Document are reliable, it has not been independently verified by
us or the BRLM or any of its affiliates or advisors. The extent to which the market and industry data used in this
Preliminary Placement Document is meaningful depends on the reader’s familiarity with and understanding of the
methodologies used in compiling such data. There are no standard data gathering methodologies in the industry
in which we conduct our business, and methodologies and assumptions may vary widely among different industry
sources. Accordingly, investment decisions should not be based solely on such information.
Neither we nor the BRLM have independently verified this data and neither we nor the BRLM make any
representation regarding the accuracy or completeness of such data. Similarly, while we believe our internal
estimates to be reasonable, such estimates have not been verified by any independent source and neither the BRLM
nor we can assure potential investors as to their accuracy. Similarly, internal estimates and surveys, industry
forecasts and market research, while believed to be reliable, have not been independently verified and neither we
nor the BRLM make any representation as to the accuracy and completeness of information based on trade,
industry and government publications and websites, data reports compiled by government bodies, professional
organisations and analysts, or from other external sources.
The extent to which the market and industry data used in this Preliminary Placement Document is
meaningful depends on the reader’s familiarity with and understanding of the methodologies used in
compiling such data.
11
FORWARD LOOKING STATEMENTS
All statements contained in this Preliminary Placement Document that are not statements of historical fact
constitute “forward-looking statements.” Investors can generally identify forward-looking statements by
terminology such as “aim”, “anticipate”, “believe”, “continue”, “could”, “estimate”, “expect”, “intend”, “can”,
“could”, “may”, “objective”, “plan”, “potential”, “project”, “pursue”, “shall”, “should”, “will”, “would”, “will
likely result”, “is likely”, “are likely”, “believe”, “expect”, “expected to”, “will continue”, “will achieve”, or other
words or phrases of similar import. Similarly, statements that describe our strategies, objectives, plans or goals
are also forward-looking statements. However, these are not the exclusive means of identifying forward-looking
statements. All statements regarding our expected financial condition and results of operations and business plans
and prospects are forward-looking statements. These forward-looking statements include statements as to our
business strategy, planned projects, revenue and profitability (including, without limitation, any financial or
operating projections or forecasts), new business and other matters discussed in this Preliminary Placement
Document that are not historical facts.
These forward-looking statements and any other projections contained in this Preliminary Placement Document
(whether made by us or any third party) are predictions and involve known and unknown risks, uncertainties,
assumptions and other factors that they may cause our actual results, performance or achievements to be materially
different from any future results, performance or achievements expressed or implied by such forward looking
statements or other projections.
Important factors that could cause our actual results, performances and achievements to be materially different
from any of the forward-looking statements include, among others:

Our ability to successfully develop or commercialise new products;

Preference of our customer, our ability to adapt to such preferences and availability of substitute products in
the market;

Competition in the market we operate;

Ability to integrate acquired businesses;

Our ability to continue our technological innovation and successful introduction of new products; and

Our manufacturing facilities operating without any disturbances/shut-down.
By their nature, certain of the market risk disclosures are only estimates and could be materially different from
what actually occurs in the future. As a result, actual future gains, losses or impact on revenue or income could
materially differ from those that have been estimated, expressed or implied by such forward-looking statements
or other projections. All forward-looking statements are subject to risks, uncertainties and assumptions about us
that could cause actual results to differ materially from those contemplated by the relevant forward-looking
statement. Additional factors that could cause our actual results, performance or achievements to differ include
but are not limited to, those discussed in “Risk Factors”, “Business” and “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” on page 33, 71 and 84.
The forward-looking statements contained in this Preliminary Placement Document are based on the beliefs of
the management, as well as the assumptions made by and information currently available to the management.
Although we believe that the expectations reflected in such forward-looking statements are reasonable at this time,
we cannot assure investors that such expectations will prove to be correct. Given these uncertainties, investors are
cautioned not to rely on such forward-looking statements. In any event, these statements speak only as of the date
of this Preliminary Placement Document or the respective dates indicated in this Preliminary Placement
Document, and we undertake no obligation to update or revise any of them, whether as a result of new information,
future events or otherwise. If any of these risks and uncertainties materialise, or if any of our underlying
assumptions prove to be incorrect, our actual results of operations or financial condition could differ materially
from that described herein as anticipated, believed, estimated or expected. All subsequent forward-looking
statements attributable to us are expressly qualified in their entirety by reference to these cautionary statements.
12
ENFORCEMENT OF CIVIL LIABILITIES
Our Company is a company incorporated under the laws of India. The Board of Directors of our Company
comprises of 12 Directors, all of whom are Indian citizens, except Nicola Paglietti, an Independent Director on
our Board, who is an Italian citizen. All of our Company’s key managerial personnel are residents of India and a
substantial portion of the assets of our Company and such persons are located in India. As a result, it may not be
possible for investors outside India to effect service of process upon our Company or such persons in India, or to
enforce against them judgments obtained in courts outside India.
India is not a signatory to any international treaty in relation to the recognition or enforcement of foreign
judgments. Recognition and enforcement of foreign judgments is provided for under section 13 and section 44A
of the Code of Civil Procedure, 1908, as amended (“Civil Code”).
Section 13 of the Civil Code provides that a foreign judgment shall be conclusive as to any matter thereby directly
adjudicated upon between the same parties or parties litigating under the same title except:
(a)
(b)
(c)
(d)
(e)
(f)
where it has not been pronounced by a court of competent jurisdiction;
where it has not been given on the merits of the case;
where it appears on the face of the proceedings to be founded on an incorrect view of international law
or a refusal to recognise the law of India in cases where such law is applicable;
where the proceedings in which the judgment was obtained were opposed to natural justice;
where it has been obtained by fraud; or
where it sustains a claim founded on a breach of any law then in force in India.
Section 44A of the Civil Code provides that where a foreign judgment has been rendered by a superior court
(within the meaning of that section) in any country or territory outside India which the Government has by
notification declared to be a reciprocating territory, it may be enforced in India by proceedings in execution as if
the foreign judgment had been rendered by the relevant court in India. Under the Civil Code, a court in India will,
upon the production of any document purporting to be a certified copy of a foreign judgment, presume that the
foreign judgment was pronounced by a court of competent jurisdiction, unless the contrary appears on record but
such presumption may be displaced by proving want of jurisdiction. However, section 44A of the Civil Code is
applicable only to monetary decrees not being in the nature of any amounts payable in respect of taxes or other
charges of a like nature or in respect of a fine or other penalty and is not applicable to arbitration awards.
Each of the United Kingdom, Singapore and Hong Kong has been declared by the Government to be a
reciprocating territory for the purposes of section 44A of the Civil Code but the United States has not been so
declared. A foreign judgment of a court in a jurisdiction which is not a reciprocating territory may be enforced
only by a new suit based upon the foreign judgment and not by proceedings in execution. Such a suit has to be
filed in India within three years from the date of the foreign judgment in the same manner as any other suit filed
to enforce a civil liability in India. Accordingly, a judgment of a court in the United States may be enforced only
by a fresh suit upon the foreign judgment and not by proceedings in execution.
It is unlikely that a court in India would award damages on the same basis as a foreign court if an action is brought
in India. Furthermore, it is unlikely that an Indian court would enforce a foreign judgment if it viewed the amount
of damages awarded as excessive or inconsistent with public policy, and it is uncertain whether an Indian court
would enforce foreign judgments that would contravene or violate Indian law. A party seeking to enforce a foreign
judgment in India is required to obtain approval from the RBI to repatriate outside India any amount recovered
pursuant to execution, and any such amount may be subject to tax in accordance with applicable laws. Any
judgment for payment of amounts denominated in a foreign currency would be converted into Rupees on the date
of the judgment and not on the date of the payment.
13
EXCHANGE RATES
Fluctuations in the exchange rate between the Rupee and foreign currencies will affect the foreign currency
equivalent of the Rupee price of the Equity Shares on the Stock Exchanges. These fluctuations will also affect the
conversion into foreign currencies of any cash dividends paid in Rupees on the Equity Shares.
The following table sets forth information with respect to the exchange rates between the Rupee and the U.S.
dollar (Rs. per US$), for the periods indicated. The exchange rates are based on the reference rates released by
RBI, which are available on the website of RBI. No representation is made that any Rupee amounts could have
been, or could be, converted into U.S. dollars at any particular rate, the rates stated below, or at all.
On June 27, 2016 the exchange rate (RBI reference rate) was Rs. 67.90 to US$ 1.00.
(Rs. per US$)
Average(1)
Period end
Financial Year:
2016
66.33
65.46
2015
62.59
61.15
2014
60.10
60.50
Month ended:
April, 2016
66.52
66.47
May, 2016
67.20
66.91
(Source: www.rbi.org.in)
(1) Average of the official rate for each working day of the relevant period.
High
Low
68.78
63.75
68.36
62.16
58.43
53.74
66.73
67.71
66.24
66.27
The following table sets forth information with respect to the exchange rates between the Rupee and the Euro (Rs.
per €), for the periods indicated. The exchange rates are based on the reference rates released by RBI, which are
available on the website of RBI. No representation is made that any Rupee amounts could have been, or could be,
converted into Euro at any particular rate, the rates stated below, or at all.
On June 27, 2016 the exchange rate (RBI reference rate) was Rs. 74.88 to €1.00.
(Rs. per €)
Period end
Average
(1)
High
Financial Year:
2016
75.10
72.31
77.36
2015
67.51
77.47
84.52
2014
82.58
81.14
91.47
Month ended:
April, 2016
75.73
75.41
75.91
May, 2016
74.79
75.69
76.61
(Source: www.rbi.org.in)
(1) Average of the official rate for each working day of the relevant period.
14
Low
66.16
65.95
69.59
74.90
74.79
DEFINITIONS AND ABBREVIATIONS
This Preliminary Placement Document uses the definitions and abbreviations set forth below, which you should
consider when reading the information contained herein.
The following list of certain capitalised terms used in this Preliminary Placement Document is intended for the
convenience of the reader/prospective investor only and is not exhaustive.
Unless otherwise specified, the capitalised terms used in this Preliminary Placement Document shall have the
meaning as defined hereunder. Further any references to any statute or regulations or policies shall include
amendments thereto, from time to time.
Company Related Terms
Term
“Articles”/ “Articles of
Association”
“Associates”
“Auditor”
“Audited Consolidated Financial
Statements”
“Audited Standalone Financial
Statements”
“Board of Directors”/ “Board”
“Company”
“CFS Brazil”
“CFS Canada”
“CFS China”
“CFS Europe”
“CFS Mauritius”
“CFS Mexico”
“CFS North America”
“Director(s)”
“Dresen”
“Dresen Acquisition”
“Dresen Mexico”
“Executive Directors”
“Financial Statements”
“Independent Directors”
“Memorandum”/ “Memorandum
of Association”
“Non-Executive Directors”
“Promoter and Promoter Group”
Description
The articles of association of our Company as amended from time to time
With reference to any company, the associate of that company would mean any
other company within the meaning of the Companies Act
The statutory auditors of our Company, namely, B. K. Khare & Co.
The audited consolidated financial statements as of and for the years ended
March 31, 2016, 2015 and 2014
The audited standalone financial statements as of and for the years ended
March 31, 2016, 2015 and 2014
The Board of Directors of our Company, or a duly constituted committee
thereof
Camlin Fine Sciences Limited
CFS do Brasil Indústria, Comércio, Importação e Exportação de Aditivos
Alimentícios Ltda.
Solentus North America Inc.
CFS International Trading (Shanghai) Ltd.
CFS Europe S.p.A.
CFCL Mauritius Private Limited
CFS Antioxidantes De Mexico S.A De C.V
CFS North America LLC.
Director(s) of our Company, unless otherwise specified
Dresen Mexcio and its subsidiaries namely, Industrias Petrotec de Mexico, S.A.
de C.V., Mexico, Nuvel S.A.C., Peru, Britec S.A., Guatemala, Inovel S.A.S.,
Colombia and Grinel S.A., Dominican Republic
Acquisition of 65% shareholding in Dresen Mexico by our Company pursuant
to a stocks purchase agreement dated February 2, 2016 entered into with
Vicente Sánchez Enriquez and another stocks purchase agreement dated
February 2, 2016 entered into with Controladora De Servicios Riso, S.A.P.I.
De C.V. For further details, see “Business – Dresen Acquisition” on page 76.
Dresen Quimica S.A.P.I. De C.V.
Executive director(s) of our Company, unless otherwise specified
The Audited Consolidated Financial Statements and Audited Standalone
Financial Statements
Independent director(s) of our Company, unless otherwise specified
The Memorandum of Association of our Company, as amended from time to
time
Non-executive director(s) of our Company, unless otherwise specified
(i) Vivek A. Dandekar; (ii) Subhash Digambar Dandekar; (iii) S. D. Dandekar
(HUF); (iv) Rajani S. Dandekar; (v) Leena Dandekar; (vi) D. P. Dandekar
(HUF); (vii) Ashish S. Dandekar; (viii) Abha A. Dandekar; (ix) Anagha
Dandekar (x) Vibha Agencies Private Limited; (xi) Camart Industries Agencies
Limited; and (xii) Cafco Consultants Limited
15
Term
“Promoter Group”
“Registered Office”
“Shareholders”
“Subsidiaries”
Description
Unless the context requires otherwise, the entities forming part of our promoter
group in accordance with SEBI ICDR Regulations and which are disclosed by
our Company to the Stock Exchanges from time to time
WICEL, Plot No F/11 & F/12, Opp SEEPZ Main Gate, Central Road,
Andheri(East), Mumbai 400 093
Persons holding Equity Shares of our Company, unless otherwise specified in
the context thereof
1. CFS Brazil;
2. CFS Canada;
3. CFS China;
4. CFS Europe
5. CFS Mauritius;
6. CFS Mexico;
7. CFS North America; and
8. Dresen
Issue Related Terms
Term
“Allocated”/ “Allocation”
“Allotment”/ “Allotted”
“Allottee(s)”
“Application Form”
“Bid”
“Bidders”
“Bidding Period”/ “Issue
Period”
“Book Running Lead
Manager”/ “BRLM”
“CAN”/ “Confirmation of
Allocation Note”
“Category III foreign portfolio
investor(s)”
“Closing Date”
“Cut-off Price”
“Designated Date
“Eligible FPIs”
“Equity Shares”
“Escrow Account”
Description
The allocation of Equity Shares following the determination of the Issue Price
to Investors on the basis of Application Forms submitted by them, in
consultation with the BRLM and in compliance with Chapter VIII of the
SEBI ICDR Regulations
The issue and allotment of Equity Shares pursuant to this Issue
Bidders who are Allotted Equity Shares of our Company pursuant to this
Issue
The form (including any revisions thereof) pursuant to which a Bidder
indicates its interest to subscribe for the Equity Shares of our Company
pursuant to the Issue
An indication of interest by a QIB, including all revisions and modifications
of interest, as provided in the Application Form, to subscribe for Equity
Shares to be issued pursuant to this Issue
A QIB who has made a Bid pursuant to the terms of the Preliminary
Placement Document and the Application Form
The period between the Issue Opening Date and Issue Closing Date inclusive
of both dates during which Bidders can submit their Bids including any
revision and/or modifications thereof
Equirus Capital Private Limited
Note or advice or intimation to Bidders confirming the allocation of Equity
Shares to such QIBs after determination of the Issue Price, and requesting
payment for the entire applicable Issue Price for all the Equity Shares
Allocated to such QIBs
FPIs who are registered as “Category III foreign portfolio investors” under
the SEBI (FPI) Regulations
The date on which the Allotment of the Equity Shares offered pursuant to this
Issue shall be made, i.e. on or about [●]
The Issue Price of the Equity Shares to be issued pursuant to the Issue which
shall be finalised by our Company in consultation with the BRLM
The date of credit of Equity Shares pursuant to the Issue to the Allottee’s
demat account, as applicable to the relevant Allottee
FPIs that are eligible to participate in this Issue and do not include qualified
foreign investors or Category III foreign portfolio investors (who are not
eligible to participate in the Issue)
The equity shares of face value Re. 1 each of our Company
The account titled ‘CFS – QIP 2016 Escrow Account’ to be opened with the
16
Term
“Escrow Bank”/ “Escrow
Agent”
“Escrow Agreement”
“Floor Price”
“Issue”
“Issue Closing Date”
“Issue Opening Date”
“Issue Price”
“Issue Size”
“Mutual Fund”
“Pay-In Date”
“Placement Agreement”
“Placement Document”
“Preliminary Placement
Document”
“QIBs”/ “Qualified
Institutional Buyers”
“QIP”
“Relevant Date”
Description
Escrow Agent, subject to the terms of the Escrow Agreement, into which the
application monies payable by Bidders in connection with subscription to
Equity Shares pursuant to the Issue shall be deposited
IDBI Bank Limited
The agreement dated June 28, 2016 entered into amongst our Company, the
Escrow Agent and the BRLM
The floor price of Rs. 89.89 per Equity Share, which has been calculated in
accordance with Chapter VIII of the SEBI ICDR Regulations. In terms of the
SEBI ICDR Regulations, the Issue Price cannot be lower than the Floor Price.
Our Company may offer a discount of not more than 5% on the Floor Price
in terms of Regulation 85 of the SEBI ICDR Regulations
The offer and issue of up to [●] Equity Shares each at a price of Rs. [●] per
Equity Share, including a premium of Rs. [●] per Equity Share, aggregating
Rs. [●] lakh pursuant to chapter VIII of the SEBI ICDR Regulations and the
provisions of the Companies Act, 2013
[●], the last date up to which the Application Forms shall be accepted by our
Company (or the BRLM, on behalf of our Company)
June 28, 2016, the date on which the acceptance of the Application Forms
shall have commenced by our Company (or the BRLM on behalf of our
Company)
A price per Equity Share of Rs. [●]
The aggregate size of the Issue, aggregating up to Rs. [●] lakh
A mutual fund registered with SEBI under the SEBI (Mutual Funds)
Regulations, 1996, as amended
Last date specified in the CAN for the payment of application monies by
Bidders in the Issue
The agreement dated June 28, 2016 between our Company and the BRLM
The Placement Document to be issued in accordance with Chapter VIII of
the SEBI ICDR Regulations and section 42 of the Companies Act, 2013 and
the rules thereunder
This Preliminary Placement Document dated June 28, 2016 issued in
accordance with Chapter VIII of the SEBI ICDR Regulations
A qualified institutional buyer as defined under Regulation 2(1)(zd) of the
SEBI ICDR Regulations
Qualified institutions placement, being private placement to Eligible QIBs
under Chapter VIII of the SEBI ICDR Regulations and applicable sections of
the Companies Act, 2013, read with applicable rules of the Companies
(Prospectus and Allotment of Securities) Rules, 2014
June 28, 2016, which is the date of the meeting wherein the Board of
Directors, or a duly authorised committee, decides to open the Issue
Conventional and General Terms/Abbreviations
Term
“AGM”
“AIF(s)”
“AS”
“AY”
“BSE”
“CCI”
“CDSL”
“CIN”
Description
Annual general meeting
Alternative investment funds, as defined and registered with SEBI under the
Securities and Exchange Board of India (Alternative Investment Funds)
Regulations, 2012
Accounting Standards issued by the Institute of Chartered Accountants of
India
Assessment year
BSE Limited
Competition Commission of India
Central Depository Services (India) Limited
Corporate identification number
17
Term
“Companies Act”
“Companies Act, 1956”
“Companies Act, 2013”
“Competition Act”
“Depositories Act”
“Depository”
“DP”/ “Depository
Participant”
“DIN”
“EGM”
“EOU”
“EPS”
“ESOP”
“FDI”
“FDI Policy”
“FEMA”
“FEMA 20”
“FIIs”
“FII Regulations”
“FIPB”
“Financial Year” / “Fiscal
Year”/ “Fiscal”/ “FY”
“FVCI”
“FPI”/ “Foreign Portfolio
Investor(s)”
“FVCI”
“GAAP”
“GAAR”
“GDP”
“GoI”/“Government”
“ICAI”
“IFRS”
“IND-AS”/“IAS Rules”
“Indian GAAP”
“Income Tax Act”/“IT Act”
Description
The Companies Act, 1956 and/or the Companies Act, 2013, as applicable
The Companies Act, 1956 and the rules made thereunder (without reference
to the provisions thereof that have ceased to have effect upon the notification
of the Notified Sections)
The Companies Act, 2013 and the rules made thereunder to the extent in force
pursuant to the notification of the Notified Sections
The Competition Act, 2002, as amended
The Depositories Act, 1996, as amended
A depository registered with SEBI under the Securities and Exchange
Board of India (Depositories and Participants) Regulations, 1996, as
amended
A depository participant as defined under the Depositories Act
Director identification number
Extraordinary general meeting
Export Oriented Unit
Earnings per share, i.e., profit after tax for a financial year divided by the
weighted average number of equity shares during the financial year
Employee stock option scheme
Foreign Direct Investment
Consolidated Foreign Direct Investment Policy notified under Circular No.
D/o IPP F. No. 5(1)/2016-FC-1, effective from June 7, 2016, as amended
from time to time
Foreign Exchange Management Act, 1999, as amended, and the regulations
framed thereunder
The Foreign Exchange Management (Transfer or Issue of Security by a
Person Resident Outside India) Regulations, 2000, as amended
Foreign institutional investors as defined under Regulation 2(g) of the SEBI
FPI Regulations and registered as such with the SEBI
The Securities and Exchange Board of India (Foreign Institutional Investors)
Regulations, 1995, as amended
Foreign Investment Promotion Board
A period of 12 months ending March 31, unless otherwise stated
Foreign venture capital investors as defined and registered with SEBI under
the Securities and Exchange Board of India (Foreign Venture Capital
Investors) Regulations, 2000, as amended
Foreign portfolio investors as defined under the SEBI FPI Regulations and
includes a person who has been registered under the SEBI FPI Regulations.
Any foreign institutional investor or qualified foreign investor who holds a
valid certificate of registration is deemed to be a foreign portfolio investor till
the expiry of the block of three years for which fees have been paid as per the
FII Regulations
Foreign venture capital investors as defined under and registered with SEBI
pursuant to the Securities and Exchange Board of India (Foreign Venture
Capital Investors) Regulations, 2000, as amended
Generally accepted accounting principles
General Anti-Avoidance Rules
Gross domestic product
Government of India
The Institute of Chartered Accountants of India
International Financial Reporting Standards issued by the International
Accounting Standards Board
Indian accounting standards as notified by the MCA vide Companies (Indian
Accounting Standards) Rule 2015 in its G.S.R dated February 16, 2015
Generally accepted accounting principles in India
The Income Tax Act, 1961, as amended
18
Term
“Insider Trading Regulations”
“LIBOR”
“Listing Regulations”
“Mn”/ “million”
“MCA”
“Networth”
“Non-Resident Indian(s)”/
“NRI”
“Notified Sections”
“NSDL”
“NSE”
“p.a.”
“PAN”
“PAT”
“RBI”
“RBI Act”
“Regulation S”
“Rs”/“Rupees”/“Indian
Rupees”
“RoC”
“SCRA”
“SCRR”
“SEBI”
“SEBI Act”
“SEBI AIF Regulations”
“SEBI FPI Regulations”
“SEBI ICDR Regulations”
“SENSEX”
“Stock Exchanges”
“STT”
“Takeover Code”
“U.S. GAAP”
“U.S.$” / “USD” / “U.S.
dollar”
“USA”/ “U.S.”/ “United
States”
“U.S. Securities Act”
“VCF”
Description
The Securities and Exchange Board of India (Prohibition of Insider Trading)
Regulations, 2015, as amended
London Interbank Offered Rate
Securities and Exchange Board of India (Listing Obligations and Disclosure
Requirements) Regulations, 2015, as amended
Million
Ministry of Corporate Affairs
Paid up share capital plus all reserves and surplus (excluding revaluation
reserves)
Non-Resident Indian, as defined under Foreign Exchange Management
(Deposit) Regulations
Sections of the Companies Act 2013 that have been notified by the
Government of India
National Securities Depository Limited
The National Stock Exchange of India Limited
Per annum
Permanent account number
Profit after tax
The Reserve Bank of India
The Reserve Bank of India Act, 1934, as amended
Regulation S under the U.S. Securities Act
The legal currency of India
Registrar of Companies, Mumbai
Securities Contracts (Regulation) Act, 1956, as amended
Securities Contracts (Regulation) Rules, 1957, as amended
The Securities and Exchange Board of India
The Securities and Exchange Board of India Act, 1992, as amended
The Securities and Exchange Board of India (Alternative Investment Funds)
Regulations, 2012, as amended
The Securities and Exchange Board of India (Foreign Portfolio Investors)
Regulations, 2014
The Securities and Exchange Board of India (Issue of Capital and Disclosure
Requirements) Regulations, 2009, as amended
An index of 30 constituent stocks traded on BSE representing a sample of
large, liquid and representative companies
The BSE and the NSE
Securities transaction tax
The SEBI (Substantial Acquisition of Shares and Takeovers) Regulations,
2011, as amended from time to time
Generally accepted accounting principles in the United States of America
United States Dollar, the legal currency of the United States of America
The United States of America
U.S. Securities Act of 1933, as amended supplemented or otherwise modified
from time to time
Venture capital fund as defined and registered with SEBI under the Securities
and Exchange Board of India (Venture Capital Fund) Regulations, 1996 or
the SEBI AIF Regulations, as the case may be
19
Technical and Industry Terms
Term
“APAC”
“BHA”
“BHT”
“EBITDA”
“EBITDA margin”
“EMEA”
“HQ”
“MEHQ”
“MMA”
“MTPA”
“PMP”
“R&D”
“SEZ”
“TBC”
“TBHQ”
Description
Asia-Pacific
Butylated Hydroxyanisole
Butylated Hydroxytoluene
Calculated by adding ‘depreciation and amortization expense’ and ‘finance
cost’ to ‘profit before exceptional items and tax’
Calculated by dividing EBITDA by ‘revenue from operations (gross)’
Europe, the Middle East and Africa
Hydroquinone
Mono Methyl Ether of Hydroquinone
Methyl Methacrylate
Metric tons per annum
Polymethylpentene
Research and development
Special economic zone
Tertiary Butyl Catechol
Tert-Butylhydroquinone
20
DISCLOSURE REQUIREMENTS UNDER FORM PAS-4 PRESCRIBED UNDER THE COMPANIES
ACT, 2013
The table below sets out the disclosure requirements as provided in PAS-4 and the relevant pages in this
Preliminary Placement Document where these disclosures, to the extent applicable, have been provided.
Sr.
No.
1.
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(i)
(ii)
(iii)
(iv)
(h)
2.
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(i)
(ii)
(iii)
(iv)
(h)
(i)
(j)
(k)
3.
(i)
(ii)
Disclosure Requirements
GENERAL INFORMATION
Name, address, website and other contact details of the company indicating
both registered office and corporate office.
Date of incorporation of the company.
Business carried on by the company and its subsidiaries with the details of
branches or units, if any.
Brief particulars of the management of the company.
Names, addresses, DIN and occupations of the directors.
Management's perception of risk factors.
Details of default, if any, including therein the amount involved, duration of
default and present status, in repayment of:
Statutory dues;
Debentures and interest thereon;
Deposits and interest thereon; and
Loan from any bank or financial institution and interest thereon.
Names, designation, address and phone number, email ID of the nodal/
compliance officer of the company, if any, for the private placement offer
process.
PARTICULARS OF THE OFFER
Date of passing of board resolution.
Date of passing of resolution in the general meeting, authorising the offer of
securities.
Kinds of securities offered (i.e. whether share or debenture) and class of
security.
Price at which the security is being offered including the premium, if any,
along with justification of the price.
Name and address of the valuer who performed valuation of the security
offered.
Amount which the company intends to raise by way of securities.
Terms of raising of securities:
Duration, if applicable;
Rate of dividend or rate of interest
Mode of payment
Repayment
Proposed time schedule for which the offer letter is valid.
Purposes and objects of the offer.
Contribution being made by the promoters or directors either as part of the
offer or separately in furtherance of such objects.
Principle terms of assets charged as security, if applicable.
DISCLOSURES WITH REGARD TO INTEREST OF DIRECTORS,
LITIGATION ETC.
Any financial or other material interest of the directors, promoters or key
managerial personnel in the offer and the effect of such interest in so far as it
is different from the interests of other persons
Details of any litigation or legal action pending or taken by any Ministry or
Department of the Government or a statutory authority against any promoter
of the offeree company during the last three years immediately preceding the
year of the circulation of the offer letter and any direction issued by such
21
Relevant Page of this
Preliminary
Placement Document
Cover page
Cover page, 156
71-83
101-107
101-102
33-52
152
NA
NA
NA
156
155
155
Cover page, 28
Cover page, 28
NA
Cover page, 28
NA
NA
NA
NA
29
55
NA
NA
104
152
Sr.
No.
(iii)
(iv)
(v)
(vi)
(vii)
4.
(a)
(i)(a)
(b)
(c)
(d)
(ii)(a)
(b)
(c)
(d)
(e)
(f)
5.
Disclosure Requirements
Ministry or Department or statutory authority upon conclusion of such
litigation or legal action shall be disclosed
Remuneration of directors (during the current year and last three Financial
Years)
Related party transactions entered during the last three Financial Years
immediately preceding the year of circulation of offer letter including with
regard to loans made or, guarantees given or securities provided
Summary of reservations or qualifications or adverse remarks of auditors in
the last five Financial Years immediately preceding the year of circulation of
offer letter and of their impact on the financial statements and financial
position of the company and the corrective steps taken and proposed to be
taken by the company for each of the said reservations or qualifications or
adverse remark
Details of any inquiry, inspections or investigations initiated or conducted
under the Companies Act, 2013 or any previous company law in the last three
years immediately preceding the year of circulation of offer letter in the case
of company and all of its subsidiaries. Also if there were any prosecutions
filed (whether pending or not) fines imposed, compounding of offences in the
last three years immediately preceding the year of the offer letter and if so,
section-wise details thereof for the company and all of its subsidiaries
Details of acts of material frauds committed against the company in the last
three years, if any, and if so, the action taken by the company
FINANCIAL POSITION OF THE COMPANY
the capital structure of the company in the following manner in a tabular form:
the authorised, issued, subscribed and paid up capital (number of securities,
description and aggregate nominal value)
size of the present offer
paid up capital:
A.
after the offer
B.
after conversion of convertible instruments (if applicable)
share premium account (before and after the offer)
the details of the existing share capital of the issuer company in a tabular form,
indicating therein with regard to each allotment, the date of allotment, the
number of shares allotted, the face value of the shares allotted, the price and
the form of consideration
Provided that the issuer company shall also disclose the number and price at
which each of the allotments were made in the last one year preceding the date
of the offer letter separately indicating the allotments made for considerations
other than cash and the details of the consideration in each case
Profits of the company, before and after making provision for tax, for the three
Financial Years immediately preceding the date of circulation of offer letter
Dividends declared by the company in respect of the said three Financial
Years; interest coverage ratio for last three years (Cash profit after tax plus
interest paid/interest paid)
A summary of the financial position of the company as in the three audited
balance sheets immediately preceding the date of circulation of offer letter
Audited Cash Flow Statement for the three years immediately preceding the
date of circulation of offer letter
Any change in accounting policies during the last three years and their effect
on the profits and the reserves of the company.
DECLARATION BY THE DIRECTORS
22
Relevant Page of this
Preliminary
Placement Document
103
106
153-154
154
152
57-59
57
Cover page, 57, 28
57
NA
57
57-59
F pages
60, 94
30-32
32
96
158-159
SUMMARY OF BUSINESS
Overview
We are a vertically integrated company, engaged in research, development, manufacturing, commercialising, and
marketing of speciality chemicals and blends which are used in a wide array of food, feed, animal and pet nutrition
and industrial products. We categorise our business into four different verticals based on our product portfolio,
namely: (i) Diphenols; (ii) Shelf-life Extension Solutions; (iii) Performance Chemicals, and (iv) Aroma. We have
recently added animal nutrition to our portfolio of products pursuant to our recent Dresen Acquisition and going
forward we expect this to complement our Shelf-life Extension Solutions portfolio. We market our products
globally including in Europe, Asia Pacific, India, South and Central America and North America.
The key raw material used for manufacturing a large part of our products is Hydroquinone and Catechol. Our
Company manufactures both these products as a part of our Diphenols business. While we use a large part of the
Diphenols we produce internally, we also sell Diphenols to external customers. Our Shelf-life Extension Solutions
include a range of antioxidant solutions used to increase the shelf life of oils and fats, which in turn is used in
processed food products like bakery, animal feed, pet food, confectionery, fried snack foods and dairy. We also
manufacture antioxidant blends (“Blending Business”), which we market under brands Xtendra and NaSure. Our
Performance Chemicals vertical includes production of amongst others, Guaiacol, Veratrole, TBC and MEHQ,
which are derivatives of either Catechol or Hydroquinone and have wide application in sectors such as food
flavouring, pharmaceuticals intermediate, agrochemicals, dyes and pigments and fragrance industry. Our Aroma
vertical primarily includes production of Vanillin and Ethyl Vanillin (“Vanillin Products”) which are marketed
under the brands Vanesse and Evanil. The key raw materials used to manufacture our Vanillin Products are
Guaiacol and Guethol, respectively, which in turn are derived from Catechol. Our Vanillin Products are used to
give food and beverages a flavour of vanilla, to enhance other flavours or to mask unwanted flavours and are used
in food, flavour and fragrance, incense sticks, pharma and cattle feed segments. We have recently acquired a 65%
shareholding in Dresen Mexico. Dresen manufactures and markets a range of animal nutrition products,
antioxidants, adsorbents, acidifying agents, bactericides, binders and mould inhibitors.
Our manufacturing facility in Italy provides captive requirements of key raw materials Hydroquinone and
Catechol, making most of our business segments vertically integrated. While we consume a large part of this
internally for our manufacturing processes in India, we also buy and sell the Diphenols in global markets,
depending on market conditions, our internal requirements and prices in global markets and in India. The proposed
new manufacturing facility at Dahej, SEZ, upon commissioning would significantly increase our capacities to
produce Diphenols and will also enable us to optimise logistics and inventory costs through establishing an
alternate source of Diphenols in India. We believe that this new manufacturing facility at Dahej will fulfil our
internal requirement of Diphenols thereby protecting us from relying on imports for our raw key materials. This
also reduces the risk of unfavourable terms of supply such as high pricing and long timeline for delivery. Our
Shelf-life Extension Solution products are manufactured in our Tarapur manufacturing facility in India. Our
Blending Business is conducted in our blending facilities Tarapur, India, Indaiatuba, Brazil and Mexico City,
Mexico. We also have a contractual arrangement in Iowa, USA for outsourcing our Blending Business to a third
party blending unit. In respect of our Performance Chemicals business, various derivatives of Diphenols are
manufactured at our facilities in Tarapur, India and shall also be manufactured in the proposed new manufacturing
facility at Dahej, SEZ, once commissioned. Derivatives of Diphenol are also manufactured at third party
manufacturing facilities in Khopoli and Mahad, Maharashtra on contractual basis. Our Vanillin Products are
currently manufactured at our own facility in Tarapur, India and at a third party manufacturing in Yuyao Zhejiang,
China, on contractual basis. Going forward, Vanillin Products will also be manufactured at the proposed new
manufacturing facility at Dahej, SEZ. Guaiacol and Guethol, which are derived from Catechol and are raw
material required for Vanillin Products, are manufactured in Tarapur, India and Mahad, India. Dresen has a
blending and manufacturing facility in Mexico which is used to manufacture animal nutrition products,
antioxidants, adsorbents, acidifying agents, bactericides, binders and mould inhibitors.
.
We are focused on R&D and innovation and have R&D units in Tarapur, India and in Ravenna, Italy. Our R&D
units are focused on developing chemical compounds, new manufacturing processes and improving existing
processes and new chemistry with a focus on developing new derivatives of Diphenols or improving the
commercial viability thereof. We also have a pilot plant in Tarapur, India. New processes which are developed in
our R&D units are implemented in small scale in our pilot plant to understand the efficacy and challenges before
commercially manufacturing such products. Our R&D units have advanced technological equipment to develop,
test and evaluate our products. Our Company also has application laboratories (“Application Labs”) in Mumbai,
USA, Mexico and Brazil. Application Labs are primarily involved with customising blends for various
applications across our Shelf-life Extension Solutions. Application Labs also provide technical assistance and
23
development support to customers, test the efficacy of various products that are produced by our customers and
conduct stability studies for determining the shelf life of various products. We have a dedicated R&D team
comprising of  employees.
We have a wide sales and marketing network, spread across the globe. We have our own sales and marketing team
in various jurisdictions including India, China, Netherlands, Italy, Brazil, Peru, Columbia, Guatemala, United
Kingdom, Denmark, Mexico, Cuba and USA, headed by experienced professionals. Our established sales and
marketing department has separate teams focusing on each of our business verticals. In certain jurisdictions such
as Indonesia, Middle East and in certain parts of India, we market and sell our products through third parties, with
whom we have sales and distribution arrangements. We have a team of 58 employees in our sales and marketing
team across the globe.
Our gross revenue from operations for the financial year Fiscal 2016 stood at Rs. 50,422.83 lakh as against
Rs.57,057.68 lakh in Fiscal 2015 and Rs.51,716.91 lakh in Fiscal 2014 (on a consolidated basis). Our EBITDA
for Fiscal 2016, 2015 and 2014 was Rs.9,606.34 lakh, Rs. 9,254.91 lakh and Rs.7,130.88 lakh, respectively and
our profit for the year was Rs. 3,582.37 lakh, Rs.5,502.73 lakh and Rs.2,871.30 lakh, respectively.
Strengths
We believe that the following are our competitive strengths:
1) Vertical integration across value chain
We are a vertically integrated company. Diphenols are the key raw materials for all our business segments. Our
manufacturing facility in Italy provides captive requirements of key raw materials Hydroquinone and Catechol,
making most of our business segments vertically integrated. Our Company is also in process of setting up of a
manufacturing facility in Dahej, SEZ, India which will manufacture Hydroquinone and Catechol. The
commissioning of a new manufacturing facility at Dahej, SEZ, would significantly increase our capacities to
produce our Diphenol products and will also enable us to optimise logistics and inventory costs through the
establishment of an alternate source of Diphenols in India. We believe that this facility will enable us to meet our
internal requirement of Diphenols for the next few years. Further, as a result of our vertical integration, we are
able to provide to our customers traceability of the various raw materials used to develop our product.
It is our endeavour to develop new value added products especially new derivatives of Diphenols, identify new
applications, and look for opportunities to vertically integrate them. Consistent and steady availability of key raw
materials at reasonable cost has lead to efficiency and effectiveness in terms of both resources and operations. Our
vertical integration model of business helps us reduce cost and thereby increase profit margin and timely delivery
of raw materials of desired quality and quantity. It further protects us from relying on external sources for our raw
materials, thereby reducing risk of unfavourable terms of supply such as high pricing and long timeline for
delivery.
2) Global outreach and diversified customer base
We are present in various geographic locations. We have manufacturing and blending facilities in India, Brazil,
Italy and Mexico. We also have a contractual arrangement in USA for outsourcing our Blending Business to a
third party blending unit. Further, our Vanillin Products are currently manufactured at our Tarapur, India facility
and at a third party manufacturing facility in Yuyao Zhejiang, China. We are in the process of setting up a new
manufacturing facility in Dahej, SEZ. Our wholly owned subsidiary, CFS Mexico has recently acquired 65%
shareholding in Dresen Mexico. Dresen is engaged in manufacturing, blending and distribution of speciality
chemicals used for animal nutrition products, antioxidants, adsorbents, acidifying agents, bactericides, binders
and mould inhibitors. The Dresen Acquisition will further help us expand our product portfolio into animal
nutrition and diversify our customer base.
We market our products in Europe, Asia Pacific, India, South and Central America and North America. Our Shelflife Extension Solutions business has customers primarily from Europe, North America, South America and Asia.
Our primary customers for Aroma and Performance Chemicals businesses are from Europe, Asia and South
America. We believe that the Dresen Acquisition will enable us to further penetrate the markets of Mexico, Central
America and parts of South America as well as expand our existing products into these geographies.
24
We have a wide sales and marketing network, spread across the globe. We have our own sales and marketing team
in various jurisdictions including India, China, Netherlands, Italy, Brazil, Peru, Columbia, Guatemala, United
Kingdom, Denmark, Mexico, Cuba and USA, headed by experienced professionals. Our established sales and
marketing department has separate teams focusing on each of our business verticals. In certain jurisdictions such
as Indonesia, Middle East and in certain parts of India, we market and sale our products through third parties, with
whom we have sales and distribution arrangements. We have team of 58 employees in our sales and marketing
team across the globe.
We believe that our global outreach and wide customer base sets us apart from other players and enables us to
compete effectively with global players in our industry.
3) Strong R&D capabilities and multiple Application Laboratories
We believe in innovation and our Company has a focused R&D unit. Our R&D leads to benefits such as product
development, product improvement, cost reduction, developing new technologies and innovations that help
improve the commercial viability of various products in our segments. Our R&D units are focused at development
of chemical compounds, developing new processes and improvement of existing processes and new chemistry
with a special focus on developing commercially viable derivatives of Diphenols. Our R&D capabilities have
been instrumental in developing our products. We have R&D units in Tarapur, India and in Ravenna, Italy. We
also have a pilot plant in Tarapur, India. New processes which are developed in our R&D units are implemented
in small scale in our pilot plant to understand the efficacy and challenges before commercially manufacturing
such products.
Our R&D units have advanced technological equipment to develop, test and evaluate our products. Most of our
products have been developed in-house by our R&D units. Our focus on research and development has been
instrumental in enabling the number of products we have introduced over the years, which we believe improves
the performance of our business. Further, our R&D units are continuously working to create value added products
from wastes and by-products of our primary products.
Our research and development facility at Tarapur and Application Lab at Mumbai has been recognised by the
Government of India’s Department of Scientific and Industrial Research as an in-house research and development
unit. We have a strong and dedicated research team of  employees in our various R&D facilities and Application
Laboratories. We believe that with our strong research, development and creative capabilities, we will be able to
further expand our product offerings and improve our product quality. We further believe that with our continuous
focus on process improvements we will be able to achieve improved efficiencies in our production process. We
believe that our focus on innovation facilitates the growth of our customer base as well as our customers’ market
share in their respective product categories.
Our Company also has Application Labs in Mumbai, USA, Mexico and Brazil. Application Labs are primarily
involved with customising blends for various applications across our Shelf-life Extension Solutions. Application
Labs also provide technical assistance and development support to our customers, test the efficacy of various
products that are produced by our customers on defined parameters relevant to our products and conduct studies
to determine the shelf life of various products.
4) Strong financials and cash flows
Our Company has witnessed significant growth in EBITDA and improvement in EBITDA margins over the past
years. Our total revenue for the Fiscal 2016 stood at Rs. 49,361.11 lakh as against Rs. 56,665.08 lakh in Fiscal
2015 and Rs. 51,833.46 lakh in Fiscal 2014. Our EBITDA for Fiscal 2016, 2015 and 2014 was Rs.9,606.34 lakh,
9,254.91 lakh and 7,130.88 lakh, respectively and our profit for the year was at Rs. 3,582.37 lakh, Rs. 5,502.73
lakh and Rs.2,871.30 lakh, respectively. Our EBITDA margins for Fiscal 2016, 2015 and 2014 were 19.05%,
16.22% and 13.79% respectively.
We have a proven track record of operations of a decade and have a strong balance sheet as well as a stable cash
flow profile. We have had positive cash flows on a consolidated basis from operation in each of the last 3 fiscal
years. We believe that our strong and consistent financial performance is an indication of our Company’s strength
which enables us to expand our business further and provide tangible value to our shareholders.
25
5) Experienced promoters and management team
We are led by a dedicated senior management team with several years of industry experience. Our Promoters have
played a key role in developing our business and we benefit from their significant experience in the industry we
operate in. We also have a qualified senior management team with experience in the domestic and international
shelf life extension, performance chemical and aroma industry. Our Promoters and senior management team have
been instrumental in our successful implementation of various process improvements, successful integration of
our acquisition in Ravenna Italy, expansion of our geographical reach and the growth in our operations over the
last decade.
We believe that our domain knowledge and experience of our Promoters and our management team provides us
with a significant competitive advantage as we seek to grow in our existing markets and enter new geographies.
We believe our senior management team is able to leverage our market position and their collective experience
and knowledge in the speciality chemicals industry, to execute our business strategies and drive our future growth.
In addition, we have an experienced and qualified team of employees. Our personnel policies are also aimed
towards recruiting qualified and talented individuals, facilitating their integration into our Company, providing a
conducive work environment, and promoting the development of their skills, including through in-house and
external training programmes.
Our Strategies
Our key strategies are as follows:
1) Grow our Vanillin business
We, through our existing contract manufacturing arrangements, manufacture Vanillin and Ethyl Vanillin which
are used as compounds in flavours and fragrances, food, incense sticks, pharmaceutical products, cattle feed and
laboratory chemicals. The basic raw material for our Vanillin and Ethyl Vanillin compound are Guaiacol and
Guethol, respectively, which are produced from the raw material Catechol. Certain publicly available information
state that there have been health hazards and regulatory scrutiny of Vanillin produced from certain raw materials
other than Catechol. This has resulted in higher demand for Vanillin derived from Catechol. As per our
understanding of Catechol industry, we believe that Catechol as a raw material is manufactured by only a few
players. Since we manufacture Catechol at our manufacturing facilities, this provides us with a significant
competitive advantage. Globally the Vanillin market, on the whole, has been valued at USD 642.33 million in
2014 and is expected to grow at a CAGR of 5.54 percent to reach USD 885.09 million by 2020. (Source:
TechNavio Report). This represents a huge opportunity for future growth. Going forward, we intend to increase
our Vanillin and Ethyl Vanillin production to capitalise on the demand for this product and market the same by
leveraging on our global reach.
Our Vanillin Products are currently manufactured at our manufacturing facility in Tarapur, India and at a third
party manufacturing facility in Yuyao Zhejiang, China. Vanillin Products are manufactured using Guaiacol and
Guethol which are derivatives of Catechol produced at our manufacturing facility in Italy. In order to achieve the
abovementioned objective of growing our Vanillin business, we have set up a plant at our Tarapur facility to
manufacture Ethly Vanillin and we are currently in the process of setting up a plant in Dahej to manufacture
Vanillin. Once the Dahej project is commissioned, we will have a Vanillin production capacity of 6,000 MTPA
(estimated). This would enable us to reduce our dependence on third parties for manufacturing our Vanillin
Products, thereby significantly increasing our revenues from sale of Vanillin and Ethyl Vanillin.
2) Increase revenue contribution from Performance Chemicals business
Increase in sales of our Performance Chemicals in Fiscal 2016 was primarily driven through sales from Guaiacol,
Veratrole, TBC and MEHQ which are derivatives of Diphenols. We also intend to better leverage our distribution
hubs and maintain stocks locally for supply in key markets such as North America, Asia and South America to
increase our customer base and reduce our transportation cost and time. We continuously strive to introduce new
products in our performance chemical segment through our in-house research and development activities.
In addition to the above, our specific strategies for increasing sales from our key performance chemical products
are as follows:

Guaiacol: Currently, a portion of our production capacity of Guaiacol is produced through contract
manufacturing. Once the new manufacturing facility in Dahej, SEZ, is commissioned, we believe our own
production capabilities of Guaiacol would increase substantially. We intend to use the Guaiacol manufactured
by us to produce Vanillin and to also sell Vanillin as well as Guaiacol in Indian and overseas markets;
26

MEHQ: Manufacturing of MEHQ has started at our Tarapur plant at the end of the second quarter of 2015.
Going forward, we intend to increase our capacity at our Tarapur facility and expand our market reach;

TBC: This is an important polymerization inhibitor for the petrochemicals industry. We currently manufacture
TBC at Khopoli through an outsourcing arrangement we intend to increase this capacity. We also intend to
continue to sell this product to our customers in Europe, South America, China, Middle East, Japan, Korea
and South East Asia. Going forward, we are also considering setting up a warehouse in the United States to
address the local market with reduced supply time;

Veratrole: This product is an important intermediate for the pharmaceutical and agrochemical industry. We
intend to increase our market share for this product and become a preferred supplier for this product.
Our Company through its continuous R&D activities is at advanced stages of commercialising certain other
derivatives of Diphenols, which will enable us to increase revenue from Performance Chemicals vertical.
3) Focus on antioxidant blends for food, feed, pet food and animal nutrition
As the food, feed and pet food industry evolves, there is a strong demand for additives which help increase the
shelf life of these products. We believe that, being one of the leading manufacturers of food grade antioxidants,
TBHQ and BHA enables us to capitalise on the demand of this industry. We are leveraging our capabilities of
manufacturing bulk antioxidants by blending these anti-oxidants with other products to provide customised
solutions to increase the shelf life of oils and fats, which in turn are used in processed food products like bakery,
animal feed, pet food, confectionery, fried snack foods and dairy. Further, due to our vertically integrated
manufacturing processes, our customers will be able to trace our blends from raw material stage to the finished
product stage which is a very critical aspect to ensure food safety. We are also currently developing natural shelf
life extension products, some of which are already commercialised and sold under our brand NaSure. Pursuant to
the Dresen Acquisition, our business has expanded to the animal nutrition segment and provided us access to the
markets of Mexico, Central America and parts of South America. In addition to our current liquid blending facility
at Brazil, we are setting up a dry blending facility in Brazil, which will further help to leverage our products from
Dresen. We also propose to set up of a dry blending facility in Ravenna, Italy to address the demand in the
European market.
We also intend to continue to develop new products and undertake studies for our customers through our various
Application Labs situated at Mumbai, USA, Mexico and Brazil. Our Application Labs has a team of food
technologists having testing and developmental capabilities in bakery, confectionery, fried snacks, fats and oils.
We believe that the Application Labs play an important role by helping us better understand the requirements of
our customers and customize our products to cater to their ever evolving requirements. We also propose to set up
an Application Lab in Denmark and going forward, we intend to set up additional Application Labs across our
key markets per business requirements.
Dresen Mexico has a portfolio of products such as animal nutrition products, antioxidants, adsorbents, acidifying
agents, bactericides, binders and mould inhibitors. The products are sold across geographies, in Mexico, Central
America and parts of South America. We intend to improve the geographical reach of Dresen’s product portfolio
by leveraging our global network.
4) To accelerate growth through strategic acquisitions and partnerships
While continuing to maintain our growth, we seek to pursue strategic acquisitions to extend our existing portfolio
of products, strengthen our technological capabilities, broaden our business segments and increase our market
share in the blends, vanillin and performance chemical verticals. Our acquisition of CFS Europe has been
successfully integrated with our business and we have grown the revenues from this business over a short period
of time. We anticipate such acquisitions may act as an enabler to grow our business, provide us with an increased
market penetration in our existing markets or enable us to establish an immediate presence in new markets and
our recent acquisition of Dresen Mexico is in line with this strategy. We are currently evaluating acquisition
opportunities in India, China and certain other overseas markets and aim to harness our experience of acquiring
and integrating new markets, technologies and products with our current operations.
27
SUMMARY OF THE ISSUE
The following is the general summary of the terms of the Issue. The summary should be read in conjunction with, and
is qualified in its entirety by, more detailed terms appearing in this Preliminary Placement Document, including under
the sections titled “Risk Factors”, “Use of Proceeds”, “Issue Procedure” and “Description of Equity Shares” on page
33, 55, 110 and 131.
Issuer
Camlin Fine Sciences Limited
Issue Size
Up to [●] Equity Shares aggregating up to Rs. [●] lakh
A minimum of 10% of the Issue Size, or at least [●] Equity Shares, shall be
available for Allocation to Mutual Funds only, and the balance [●] Equity
Shares shall be available for Allocation to all QIBs, including Mutual Funds
In case of under-subscription or no subscription in the portion available for
Allocation only to Mutual Funds, such portion or part thereof may be Allotted
to other QIBs
Re. 1 per Equity Share
Rs. [●] per Equity Share
Minimum value of offer or invitation to subscribe to each QIB is Rs. 20,000 of
the face value of the Equity Shares
Rs. 89.89 per Equity Share. Our Company may offer a discount of up to 5%
(i.e. Rs. 4.49) on the Floor Price in terms of Regulation 85 of the SEBI ICDR
Regulations. The Floor Price, net of discount of 5% is Rs. 85.40
QIBs as defined in Regulation 2(1)(zd) of the SEBI ICDR Regulations to
whom the Preliminary Placement Document and the Application Form is
circulated and who are eligible to bid and participate in the Issue and QIBs not
excluded pursuant to Regulation 86(1)(b) of the SEBI ICDR Regulations. See
“Issue Procedure”, “Selling Restrictions” and “Transfer Restrictions” on page
110, 122 and 127, respectively. The list of QIBs to whom the Preliminary
Placement Document and Application Form is delivered shall be determined
by the BRLM in consultation with our Company, at their sole discretion
See “Description of Equity Shares”, “Dividend Policy” and “Statement of Tax
Benefits” on page 131, 60 and 137, respectively
See “Statement of Tax Benefits” on page 137
Face Value
Issue Price
Minimum Offer Size
Floor Price
Eligible Investors
Dividend
Indian Taxation
Date of Board Resolution
authorizing the Issue
Date of passing of resolution by
Shareholders authorizing the
issue
Equity Shares issued and
outstanding immediately prior
to the issue
Equity Shares issued and
outstanding immediately after
the Issue
Listing
Lock-up
Transferability
Restriction
September 25, 2015
December 2, 2015
9,66,65,830 Equity Shares
[] Equity Shares
Our Company has obtained in-principle approval dated June 28, 2016 in terms
of Regulation 28(1) of the Listing Regulations for listing of the Equity Shares
pursuant to the Issue, from the Stock Exchanges. Our Company shall make
application to each of the Stock Exchanges after allotment to obtain final listing
and trading approvals for the Equity Shares
Please see the sub-section titled “Lock-up” of “Placement Agreement” on page
120 for a description of restrictions on our Company and our Promoters in
relation to Equity Shares
The Equity Shares being Allotted pursuant to this Issue shall not be sold for a
period of one year from the date of Allotment, except on the floor of the Stock
28
Exchanges. For details in relation to other transfer restrictions, see “Selling
Restrictions” and “Transfer Restrictions” on page 122 and 127, respectively.
Use of Proceeds
Risk Factors
Pay-in Date
The net proceeds of the Issue, after deduction of fees, commissions and
expenses in relation to the Issue, are expected to total approximately Rs. [●]
lakh. Please see “Use of Proceeds” on page 55 for further information
Please “Risk Factors” on page 33 for a discussion of risks that you should
consider before participating in the Issue
Last date specified in the CAN sent to the successful Bidders for payment of
application money.
Closing Date
The Allotment is expected to be made on or about [●], 2016
Ranking
The Equity Shares being issued pursuant to the Issue shall be subject to the
provisions of the Memorandum and Articles of Association and shall rank pari
passu in all respects with the existing Equity Shares including the rights in
respect of dividends after the closing. The holders of such Equity Shares will
be entitled to participate in dividends and other corporate benefits, if any,
declared by our Company after the Closing Date, in compliance with the
Companies Act, 2013. The holders of such Equity Shares may attend and vote
in shareholders’ meetings in accordance with the provisions of the Companies
Act, 2013. Please see “Description of Equity Shares” on page 131.
Voting Rights of Share Holders
See the section titled “Description of Equity Shares- Voting Rights” on page
134.
Security Codes for the Equity
Shares
ISIN: INE052I01032
BSE Code: 532834
NSE Code: CAMLINFINE
Bloomberg: CFIN IN
29
SUMMARY FINANCIAL INFORMATION
The following selected information is extracted from and should be read in conjunction with our Audited
Consolidated Financial Statements and notes thereto prepared in accordance with Indian GAAP, each included
elsewhere in this Preliminary Placement Document.
Consolidated Balance Sheet
(Rs., lakh)
Fiscal 2014
Fiscal 2016
Fiscal 2015
966.66
16,654.90
17,621.56
958.88
12,527.63
13,486.51
944.08
8,386.36
9,330.44
2,144.80
324.51
185.26
2,654.57
2,806.33
374.34
147.00
3,327.67
2,852.46
(403.55)
2,448.91
14,570.49
9,531.43
2,739.52
1,152.90
27,994.34
48,270.47
12,095.37
10,655.48
1,949.54
1,453.02
26,153.41
42,967.59
10,401.47
10,000.83
2,772.99
1,510.54
24,685.83
36,465.18
12,788.89
1,238.49
2,506.46
16,533.84
109.42
1,485.23
169.61
9,321.87
1,320.65
282.07
10,924.59
109.05
1,643.71
420.76
7,920.58
394.54
2,207.82
10,522.94
120.97
146.22
17,331.54
7,548.06
1,889.64
219.88
2,983.25
29,972.37
48,270.47
13,638.07
11,341.90
1,926.34
2,103.25
859.92
29,869.48
42,967.59
10,920.39
10,132.47
1,580.26
2,231.66
810.27
25,675.05
36,465.18
EQUITY AND LIABILITIES
Shareholders' Funds
Share Capital
Reserves & Surplus
Non-current liabilities
Long term Borrowings
Deferred tax liability, net
Long-term provision
Current liabilities
Short-term Borrowings
Trade payables
Other current liabilities
Short-term provisions
TOTAL
ASSETS
Non-current assets
Fixed Assets
Tangible assets
Intangible assets
Capital work-in-progress
Non-current Investments
Deferred tax Assets
Long- term loans and advances
Current assets
Inventories
Trade receivables
Cash and Bank Balances
Short-term loans and advances
Other current assets
TOTAL
30
Consolidated Statement of Profit and Loss
INCOME
Revenue from operations (Gross)
Less: Excise Duty
Revenue from operations (Net])
Other Income
Total Revenue
EXPENDITURE
Cost of materials consumed
Purchase of stock in trade
Changes in inventories of finished goods/WIP/stock in trade
Employee benefits expense
Finance cost
Depreciation and amortisation expense
Research and development expenses
Other expenses
Profit before exceptional items and tax
Exceptional item
Profit before tax
Less: Tax expense
- Current Tax
- Prior period Tax Adjustment
- MAT credit entitlement
- Deferred tax (charge/ credit)
Profit for the year
Add: Share of profit/(loss) of associate for the year
Profit for the year
Earnings per equity share of face value of Re 1/- each (for
Fiscal 2015 and 2016) and Rs. 2 each (for Fiscal 2014)
Basic (in Rs)
Diluted (in Rs)
31
Fiscal 2016
Fiscal 2015
(Rs., lakh)
Fiscal 2014
50,422.83
(1,488.61)
48,934.22
426.89
49,361.11
57,057.68
(1,230.23)
55,827.45
837.63
56,665.08
51,716.91
(849.83)
50,867.08
966.38
51,833.46
24,275.40
750.76
(4,716.09)
4,005.21
2,444.25
1,705.52
210.08
15,229.41
43,904.54
5,456.57
(454.73)
5,001.84
26,037.68
190.79
821.17
4,058.29
2,382.46
1,624.62
247.89
16,054.35
51,417.25
5,247.83
35.52
5,283.35
26,036.91
499.50
1,037.12
3,437.34
2,465.90
1,178.60
272.37
13,419.34
48,347.08
3,486.38
3,486.38
987.95
24.71
144.49
262.69
3,582.00
0.37
3,582.37
1,053.51
(144.49)
(1,129.81)
5,504.14
(1.41)
5,502.73
1,066.09
(453.48)
2,873.77
(2.47)
2,871.30
3.73
3.71
5.77
5.75
6.11
6.08
Consolidated Cash Flow Statement
A.
B.
C.
(Rs., lakh)
Fiscal 2014
Fiscal 2016
Fiscal 2015
5,456.57
5,247.83
3,486.38
CASH FLOW FROM OPERATING
ACTIVITIES:
Net Profit before exceptional items and taxation
Adjustments for:
Depreciation on Fixed Assets
Deferred employee compensation expenses amortised
Foreign Exchange loss/(gain) (Unrealised)
(Profit)/Loss on Sale of Fixed Assets
Provision for Doubtful Advances
Provision for Doubtful Debts (Net)
Provision for Doubtful Investment
Provision for leave encashment
Finance costs
Interest Received/Dividend Received
Operating Profit before Working Capital changes
Adjustments for:
(Increase) / Decrease in inventories
(Increase) / Decrease in trade receivables
(Increase) / Decrease in short term loans and advances
(Increase) / Decrease in long term loans and advances
(Increase) / Decrease in other receivables
Increase / (Decrease) in trade payable
Increase / (Decrease) in other payable
Cash generated in Operations
Direct taxes paid
Net cash generated from operating activities
1,705.52
(8.52)
169.30
30.11
94.75
127.28
2,444.25
(128.12)
9,891.14
1,624.62
(11.82)
(263.16)
(47.62)
160.00
876.93
10.51
137.24
2,382.46
(142.89)
9,974.09
1,178.60
10.82
298.80
96.23
61.24
91.87
2,465.90
(175.52)
7,514.32
(3,693.47)
3,673.30
34.49
(343.54)
(1,267.56)
82.73
8,377.09
(1,219.85)
7,157.24
(2,717.67)
(1,902.29)
(58.32)
(130.05)
(49.65)
733.75
(136.11)
5,713.76
(1,088.24)
4,625.51
3,979.51
(1,679.32)
(92.13)
(46.12)
(810.27)
(5,705.88)
481.32
3,641.43
(967.20)
2,674.23
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of Fixed Assets
Sale of Fixed Assets
(Purchase)/Sale of Investments
Interest received
Dividend received
Net cash used in Investing Activities
(6,708.12)
2.13
128.12
(6,577.87)
(2,824.86)
54.73
141.78
0.03
(2,628.32)
(3,627.91)
234.50
2.47
175.31
0.05
(3,215.58)
2,475.12
521.00
(955.00)
270.77
10.73
(54.38)
(2,423.37)
(432.69)
(88.10)
(675.92)
(96.55)
1,010.76
134.04
26.73
110.21
(2,436.82)
(335.97)
(56.65)
(1,547.70)
449.49
2,269.40
35.70
(2,432.18)
(277.78)
(47.85)
(452.71)
(994.06)
6.64
892.81
899.45
9.50
793.40
802.90
4.25
445.72
449.97
6.64
892.81
899.45
9.12
2,565.20
2,574.32
4.25
1,576.01
1,580.26
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from borrowings (Net of repayments)
Receipt of term loan
Repayment of term loan
Proceeds from issue of share capital
Receipt/(Payment) of Loans and advances
Maturity of/(Investment in) Margin Fixed Deposit
Interest Paid
Dividend Paid
Tax on Dividend
Net cash used in Financing Activities
NET INCREASE/(DECREASE) IN CASH AND
CASH EQUIVALENTS
Cash in hand
Bank balances
Opening Cash and Cash Equivalents
Cash in hand
Bank balances
Closing Cash and Cash Equivalents
32
RISK FACTORS
This offering and an investment in Equity Shares involve a high degree of risk. You should carefully consider the
risks described below as well as other information contained in this Preliminary Placement Document before
making an investment decision in the Issue. If any one or some combination of the risks described below actually
occurs, our business, prospects, financial condition, results of operation and cash flows could be seriously
harmed, the trading price of our Equity Shares could decline and you may lose all or part of your investment.
Unless specified in the risk factors below, we are not in a position to quantify the financial implications of any of
the risks mentioned below. We have described the risks and uncertainties that our management currently believes
are material but the risks set out in this Preliminary Placement Document may not be exhaustive or complete and
additional risks and uncertainties not presently known to us, or which we currently deem to be immaterial, may
arise or may become material in the future. This section should be read together with “Industry Overview”,
“Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as
well as the financial statements, including the notes thereto, and other financial information included elsewhere
in this Preliminary Placement Document. This Preliminary Placement Document also contains forward-looking
statements that involve risks and uncertainties. Our results could differ materially from such forward-looking
statements as a result of certain factors including the considerations described below and elsewhere in this
Preliminary Placement Document. Additional risks not described below or not currently known to us or that we
currently deem immaterial may also adversely affect the market price of our Equity Shares. In making an
investment decision, prospective investors must rely on their own examination of our Company and the terms of
the Issue including the merits and the risks involved.
Risk relating to our business
1.
A large part of our business includes manufacturing, marketing and supply of speciality chemicals which
are used in food, animal nutrition and pet-food. Any adverse change in regulations governing usage of
our products by our customers or the ultimate end user industries of our products, can adversely impact
our business, result of operations and price of shares of our Company
If any regulatory authority across the globe restricts the usage of, raises concerns on or issues risk warning on any
of our products, it may impact our business and results of operations. Furthermore, it may have a negative impact
on regulatory regime and demand for such product in other markets as well. Some of our products have restriction,
whether in terms of limits or otherwise, of usage in the end product. Furthermore, in case any enquiries, studies
or proceedings are initiated which challenge the safety of our products, we would have to divert management time
and resources in responding to such enquiries, facilitate the respective studies or defending such proceedings
which could adversely affect our profitability and growth prospects.
2.
If we are unable to successfully develop or commercialize new products, our operating results will suffer.
Our industry is subject to ongoing product improvements and periodic technological changes. In order to sustain
growth, maintain margins and remain competitive, we must successfully develop and introduce new products or
improvements to our existing products which offer better product attributes to our customers. Our Company
intends to leverage its capabilities of manufacturing Shelf-Life Extension products, especially which are
customised to the requirements of our customers. We continuously strive to develop new derivatives of Diphenols
to expand our Performance Chemicals business. Developing and commercializing a new product is time
consuming, costly and subject to numerous factors, including:





the ability to correctly anticipate customer needs;
the ability to develop products in a timely manner and in compliance with regulatory requirements;
the risk that any of our products presently under development, if and when fully developed and tested, will
not perform as expected;
locate and establish collaborations with suppliers and distributors to distribute our products in our targeted
markets as well as to ensure the availability, on commercially reasonable terms, of raw materials, such as
Phenol; and
our ability to scale-up manufacturing methods to successfully manufacture commercial quantities of products
in compliance with regulatory requirements, in a timely and cost effective manner.
Our long-term competitiveness and growth of our operations depends, to a significant degree, on our ability to
successfully develop, secure approvals for and commercialize, in a timely manner, new products in all of our key
33
markets through our research and development activities. If any of our products, when acquired or developed and
approved, cannot be successfully or timely commercialized, our operating results could be adversely affected.
There can be no assurance that we will be able to successfully commercialize the products that we develop within
the time constraints necessary to be successful.
The cost of research, development and commercialization efforts can be significant and the likelihood of success
of any such programs is difficult to predict. We cannot guarantee that any investment we make in developing
products will be recouped, even if we are successful in commercializing those products. Due to the time it takes
to develop a new product and receive all relevant approvals, the competitive landscape for such products may
change or differ significantly from what we had anticipated, and our products may not hold the competitive
advantages in pricing or efficacy that we had anticipated during development. If any of the new products is not
well accepted by the market, such products may not yield an appropriate return on our related research and
development and marketing costs.
In the event we fail to successfully and timely develop and commercialize new products, our business prospects
and results of operations could be materially and adversely affected.
3.
Our business exposes us to potential product liability claims and recalls, which could adversely affect our
financial condition and performance.
The development, manufacture and sale of chemical and other products by us, including products produced for
the food, beverage, pharmaceutical, pet food and feed industries, involve an inherent risk of exposure to product
liability claims, product recalls, product seizures and related adverse publicity. Such products are subject to
significant regulatory scrutiny in many jurisdictions. There can be no assurances that we will not become subject
to product liability claims or that we will be able to successfully defend ourselves against any such claims. The
outcome of litigation and other legal proceedings that we may be involved in the future is difficult to assess or
quantify. Plaintiffs may seek recovery of very large or indeterminate amounts, and the magnitude of the potential
loss relating to such lawsuits may remain unknown for substantial periods of time. Defence and settlement costs
can be substantial, even with respect to claims that have no merit. Due to the inherent uncertainty of the litigation
process, the litigation process could take away from the time and effort of our management. A product liability
claim or judgment against us could also result in substantial and unexpected expenditures, affect consumer or
customer confidence in our products, and divert management’s attention from other responsibilities. Although we
maintain product liability insurance, there can be no assurance that this type or the level of coverage is adequate
or that we will be able to continue to maintain our existing insurance or obtain comparable insurance at a
reasonable cost, if at all. A product recall or a partially or completely uninsured product liability judgment against
us could have a material adverse effect on our reputation, results of operations and financial condition.
4.
Due to our dependence on a limited number of products, our business could be materially adversely
affected if our key products do not perform as well as expected or if competing products become available
and gain wider market acceptance.
We generate a significant portion of our total revenues and gross margin from the sale of a limited number of
products. For the financial year ended March 31, 2016, sale of our top three products contributed more than half
of our total consolidated revenue from operations. Our revenues from these products may decline as a result of
increased competition, regulatory action, pricing pressures or fluctuations in the demand or supply. Similarly, in
the event of any breakthroughs in the development of products, our products may become obsolete or be
substituted by such alternatives.
Our key products could be rendered obsolete or uneconomical by numerous factors, many of which are beyond
our control, including:
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pricing actions by competitors;
development by others of new products that are more effective than ours;
entrance of new competitors into our markets;
loss of key relationships with suppliers or end-user customers;
technological advances;
adverse regulatory actions;
manufacturing or supply interruptions;
product liability claims; and
product recalls or safety alerts.
34
Any material adverse developments, including increased competition and supply shortages, with respect to the
sale or use of these products could have a material adverse effect on our revenues and gross margin.
5.
Our Company’s name is featuring in the ‘Denied Entity List’ issued by the Directorate General of
Foreign Trade.
Our manufacturing facility in Tarapur is an EOU. Our Company’s name and importer-exporter code is featuring
in the ‘Denied Entity List’ issued by the Directorate of Foreign Trade (“DGFT”), pursuant to its order dated
December 19, 2013, for not fulfilling export obligations. Whilst our Company has represented to the DGFT
explaining that it has already complied with the export obligations, there is no assurance that our Company’s name
and importer-exporter code would be removed from the Denied Entity List’. Since our Company’s name and
importer-exporter code is featuring in the ‘Denied Entity List’, our Company is presently restrained to derive
certain benefits that are otherwise available. Further, although our Company is presently involved in export and
import activities, since our Company’s name and importer-exporter code is featuring in the ‘Denied Entity List’,
our Company may not be entitled to import or export any goods except under a special licence, granted, in such
manner and subject to such conditions as may be prescribed by the DGFT. Any restriction in relation to deriving
certain benefits that are otherwise available and export and import activities of our Company may have an adverse
effect on our business, cash flows, financial condition and results of operations.
6.
The success of our products depends on our customers’ preferences.
Our products are used by our customers in, among others, fast foods, beverages, other food, pet food and feed.
Our commercial success depends to a large extent on the preference of our customers to use a particular type of
product. These preferences are typically influenced by factors such as cost, easy availability, market
acceptability, regulatory acceptability, substitutes available in the market etc. We cannot assure you that our
customers will prefer our products over others or we will be able to adapt to the customers’ preference. To
compete successfully and achieve our strategic goals, we may have to engage ourselves in innovation and make
considerable investments in product development and market research in order to anticipate the customers’ needs
and provide the service level that is required. Our investments may only generate future revenues to the extent
that we are able to successfully develop products that meet our customers’ specifications, at an acceptable price.
Any of these factors could have an adverse effect on our cash flows, business, financial condition and results of
operations.
7.
We rely on third-party manufacturers to manufacture our products.
We outsource to third-party vendors the manufacturing of certain our Performance Chemicals and Aroma
products. For details of our relationships with these third-party manufacturers, see the section titled “Business –
Manufacturing”. While we maintain supervision over these manufacturers, notwithstanding our efforts, our
third-party manufacturers may take actions contrary to our instructions or requests, or be unable or unwilling
to fulfil their obligations. In such event, we may have disputes with our third-party manufacturers, or may be
held responsible for their actions, any of which could lead to damages to our reputation, additional expenses and
disruptions. We cannot assure you that we will be able to enter into similar collaborative relationships with thirdparty manufacturers in a timely manner or at all in the event we need additional manufacturing of our products or
if we need to find a replacement manufacturer. Our inability to maintain or develop such relationships could
adversely impact our ability to meet our delivery obligations, results from operations and limit the growth of our
sales.
Moreover, our third-party manufactures are also required to hold the approvals required to manufacture the
relevant products. Any lapse in their quality practices and quality management systems could lead to adverse
outcomes if they fail to comply with the regulatory requirements. We cannot guarantee that our quality practices
and quality management systems, or those of our third-party manufacturers, will prevent adverse outcomes.
If we or our third-party manufacturers fail to comply fully with regulatory requirements, we could be required to
shut down our production facilities or stop marketing our products. This could lead to product shortages, or to
our being entirely unable to supply products to customers for an extended period of time. Such shortages or shut
downs could lead to significant losses of sales revenue and to potential third-party litigation.
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8.
The global scope of our operations subjects us to the risks of doing business in foreign countries, which
could adversely affect our business, financial condition and results of operations.
We market our products globally including in Europe, Asia Pacific, India, South and Central America and North
America. We have production facilities located in India, Italy, Mexico and Brazil. We also have contractual
manufacturing arrangement in China and USA. Our consolidated net revenue from operations for the Fiscal 2016
was Rs. 48,934.22 lacs. Our domestic sales in India for the same period was Rs.8437.09 lacs, thus sales other than
domestic sales in India was 82.76% as a percentage of our consolidated net revenues from operations for Fiscal
2016. We expect our revenues from outside India to continue to represent a substantial majority of our revenue.
Accordingly, our business is subject to risks related to the differing legal, political, social and regulatory
requirements and economic conditions of many jurisdictions. Risks inherent in operations outside India include
the following:
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cost structures and cultural and language factors associated with managing and coordinating our international
operations, including establishing relationships with new customers;
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compliance with a wide range of regulatory requirements, foreign laws, including immigration, labour laws,
tax laws;
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difficulty in staffing and managing foreign operations;
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commercial agreements may be more difficult to enforce and receivables more difficult to collect;
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intellectual property rights may be more difficult to enforce;
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increased shipping costs, disruptions in shipping or reduced availability of freight transportation;
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we may have difficulty transferring our profits or capital from foreign operations to other countries where
such funds could be more profitably deployed;
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we may experience unexpected adverse changes in export duties, quotas and tariffs and difficulties in
obtaining export licenses;
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some foreign countries have adopted, and others may impose, additional withholding taxes or adopt other
restrictions on foreign trade or investment, including currency exchange and capital controls;
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foreign governments may nationalize private enterprises;
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our business and profitability in a particular country could be affected by political or economic repercussions
on a domestic, country specific or global level from terrorist activities and the response to such activities;
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we may be affected by unexpected adverse changes in foreign laws or regulatory requirements; and
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unanticipated events, such as geopolitical changes, could adversely affect our foreign operations.
Our success as a global business will depend, in part, upon our ability to succeed in differing legal, regulatory,
economic, social and political conditions by developing, implementing and maintaining policies and strategies
that are effective in each location where we do business.
9.
The competitive nature of our markets may delay or prevent us from passing increases in raw material
costs on to our customers. In addition, certain of our suppliers may be unable to deliver products or raw
materials or may withdraw from contractual arrangements. The occurrence of either event could adversely
affect our results of operations.
Rising and volatile pricing of Phenol, our primary raw material and a derivative of petroleum, may negatively
impact our costs, results of operations and the valuation of inventory. Our profitability is sensitive to changes in
the costs of Phenol caused by changes in supply, demand or other market conditions, over which we have little or
no control. Factors such as increased transportation costs and transportation strikes could adversely impact the
supply of raw materials that we require. We will not always be able to raise prices in response to such increased
costs, and our ability to pass on the costs of such price increases is dependent upon market conditions. Likewise,
36
reductions in the valuation of our inventory due to market volatility may not be recovered and could result in
losses. Although our Company is vertically integrated, in addition to Phenol, we also purchase certain other raw
materials from third party suppliers
For the Fiscal 2016, 2015 and 2014, and on a consolidated basis, our cost of materials consumed, purchases of
stock-in-trade, changes in inventories of finished goods, WIP and stock-in trade together as a percentage of our
total revenue was 41.15%, 47.74% and 53.20%, respectively. If the suppliers are unable to meet our orders in a
timely manner or choose to terminate or otherwise avoid contractual arrangements, we may not be able to make
alternative supply arrangements. Also, domestic and global government regulations related to the manufacture or
transport of certain raw materials may impede our ability to obtain such raw materials on commercially reasonable
terms. If we are unable to obtain and retain qualified suppliers under commercially acceptable terms, our ability
to manufacture and deliver products in a timely, competitive and profitable manner or grow our business
successfully could be adversely affected.
10. We derive a significant portion of our revenue from a few customers and a loss of one or more such
significant customers or a reduction in their demand for products could adversely affect our business,
financial condition and results of operations.
We are dependent on a limited number of customers for a significant portion of our income. For Fiscals 2016,
2015 and 2014, 47.89%, 48.69% and 50.46%, respectively, of our consolidated total income were derived from
our top ten customers. The loss of one or more of these significant customers or a reduction in the amount of
business we obtain from them could have an adverse effect on our business, financial condition and results of
operations. We cannot assure you that we will be able to maintain historic levels of business from our significant
customers or that we will be able to significantly reduce customer concentration in the future.
11. We do not have long term agreements with a majority of our suppliers and customers.
We typically enter into annual supply contracts with third parties for some of our raw materials. However, we do
not have long term agreements with a majority of our suppliers. We do not have long term agreements with any
of our customers. The success of our business is significantly dependent on maintaining good relationships with
our suppliers and customers. Short term supplier contracts subject us to risks such as price volatility, unavailability
of certain raw materials in the short term and failure to source critical raw materials in time, which would result
in a delay in manufacturing of the final product. Any delay in supplying products in accordance with the terms
and conditions of the purchase orders, such as delivery within a specified time, could result in the customer
refusing to accept our products, which could have an adverse effect on our business and reputation. Further, we
cannot assure you that we will be able to enter into new or renew our existing arrangements with suppliers on
terms acceptable to us, which could have an adverse effect on our ability to source raw materials in a commercially
viable and timely manner, if at all, which may impact our business and profitability.
While we have long term relationships with several customers, we do not have long term contractual agreements
with a majority of our customers. Absence of such long term agreements exposes us to the risk that our customers
may cease to source products from us. In case of such eventuality, where a customer or several customers cease
procurement of products from us, our revenues and reputation would be materially affected, which could also
impact our ability to enter into arrangements with new customers, thereby limiting business growth.
12. If we are not able to continue our technological innovation and successful introduction of new products,
our customers may turn to other suppliers to meet their requirements.
The speciality chemicals industry and the end-use markets into which we sell our products experience ongoing
technological change and product improvements. A key element of our business strategy is to invest in research
and development activities with the goal of introducing new high-performance, technically differentiated
products. For the Fiscal 2016, expenses incurred on R&D was Rs. 210.08 lakh. We may not be successful in
developing new technology and products that successfully compete with products introduced by our competitors,
and our customers may not accept, or may have lower demand for, our new products. If we fail to keep pace with
evolving technological innovations or fail to improve our products in response to our customers’ needs, then our
business, financial condition and results of operations could be adversely affected as a result of reduced sales of
our products.
37
13. If we fail to comply with regulations prescribed by governments and regulatory agencies, our business,
results of operations and financial condition could be adversely affected.
Our operations are subject to regulation in each market in which we do business. All aspects of our business,
including our research and development activities, manufacturing operations and sales and marketing activities,
are subject to legislation and regulation by various local, regional, national and overseas regulatory regimes. Our
business is also subject to, among other things, the receipt of all required licenses, permits and authorizations
including local land use permits, manufacturing permits, building and zoning permits, and environmental, health
and safety permits. We are also subject to the laws and regulations governing relationships with employees such
as minimum wage and maximum working hours, overtime, working conditions, hiring and termination of
employees, contract labour and work permits. If we fail to comply with the applicable laws and regulations, we
may be subject to penalties, including the revocation or suspension of our licenses and approvals and criminal
sanctions. Our failure to obtain such licences and approvals and comply with the applicable laws and regulations
could lead to imposition of sanctions by the relevant authorities including penalties. Currently, our Company does
not have license under the Poisons Act, 1919. Our Company is in the process of making an application for license
under the Poisons Act, 1919.
Our business is substantially dependent on revenues from outside India. Regulatory requirements are still evolving
in many markets and are subject to change and as a result may, at times, be unclear or inconsistent. Consequently,
there is increased risk that we may inadvertently fail to comply with such regulations, which could lead to a loss
of business from such geographies, significant impact on our business and result of operations.
Further, we require certain statutory and regulatory permits, licenses and approvals to carry out our business
operations and applications. As a part of our business, we apply for renewal or modification of such regulatory
permits, licenses and approvals. While we apply for such approvals and permits, we cannot assure you that we
will receive these approvals in a timely manner or at all or that our activities during the interim period will not
be considered to be in violation of Law. Further, in future we will be required to timely apply for the renewal of
approvals and permits for our business operations to continue. If we are unable to make application and renew
or obtain necessary permits, licenses and approvals on acceptable terms, in a timely manner or at all, our business
operations may be adversely affected.
14. We are required to comply with environmental laws and regulations that could cause us to incur significant
costs.
Our manufacturing facilities, and those of the third parties with whom we contract for manufacturing services, are
subject to a broad range of safety, health, environmental, workplace and related laws and regulations in the
jurisdictions in which we operate, which impose controls on the disposal and storage of raw materials, noise
emissions, air and water discharges, on the storage, handling, discharge and disposal of chemicals, employee
exposure to hazardous substances and other aspects of our operations, and we expect that additional requirements
with respect to environmental matters will be imposed in the future. For example, environment laws in India limit
the production level and amount of hazardous and pollutant discharge that our manufacturing facilities may release
into the air and water. We cannot assure you that we have and shall be always able to comply with the stipulated
production limit. Further, the discharge of raw materials that are chemical in nature or of other hazardous
substances into the air, soil or water beyond the stipulated limits may cause us to be liable to regulatory bodies or
third parties. In addition, we may be required to incur costs to remedy the damage caused by such discharges, pay
fines or other penalties for non-compliance.
Our research and development and manufacturing involve the use of hazardous materials and chemicals and
related equipment. We are subject to operating risks associated with handling of such hazardous materials such as
possibility for leakages and ruptures from containers, explosions, and the discharge or release of toxic or
hazardous substances, which in turn may cause personal injury, property damage and environmental
contamination. If an accident occurs, we could be held liable for resulting damages, which could be substantial.
Material future expenditures may be necessary if compliance standards change, if material unknown conditions
that require remediation are discovered or if required remediation of known conditions becomes more extensive
than expected. If these costs become prohibitive, we may be forced to curtail or cease certain of our manufacturing
operations. If we fail to comply with present and future environmental laws and regulations, we could be subject
to substantial fines, criminal sanctions, revocation of operating permits, shutdown of our production facilities and
the imposition of obligations to take corrective measures, which could harm our business, financial condition and
results of operations. Environmental laws could also restrict our ability to expand our facilities or could require
38
us to acquire costly equipment or to incur other significant expenses in connection with our manufacturing
processes.
15. We engage contract labour for carrying out certain business operations.
In order to retain operational efficiencies, we engage independent contractors through whom we engage contract
labourers for performance of certain functions at our manufacturing units. Although we do not engage these
labourers directly, we are responsible for any wage payments to be made to such labourers in the event of default
by such independent contractors. Any requirement to fund their wage requirements may have an adverse impact
on our results of operations and our financial conditions. In addition, we may be liable for or exposed to litigations,
sanctions, penalties or losses arising from accidents or damages caused by our workers or contractors.
16. Our success is dependent on our marketing abilities and arrangements with our distributors for the sale
and distribution of our products. Any disruption in our marketing arrangement will adversely affect our
sales and results of operations.
Whilst we have a strong network of marketing and sales team in various jurisdictions including India, China,
Netherlands, Italy, Brazil, Peru, Columbia, Guatemala, United Kingdom, Denmark, Mexico, Cuba and USA, we
distribute and market our products through third party distributors in jurisdiction like Indonesia, Middle East and
in certain parts of India. If any third party in our sales channels treats our competitors’ products more favourably
than ours, or stops selling our products, and we are unable to find appropriate substitutes, our business, financial
condition and results of operations may be adversely affected. Any inability by our distributors to sell our products
would have an adverse effect on our operations. We typically enter into long term agreements with these third
party distributors and such agreements generally provide for termination on short notice. This restricts our ability
to find and appoint new distributors in short span of time. Our reliance on, and inability to control, local sale,
marketing and distribution agents could adversely affect our business, financial condition and results of
operations. We may not be able to find suitable partners or successfully enter into arrangements on commercially
reasonable terms or at all. Additionally, our distribution partners may make important marketing and other
commercial decisions concerning our products without our input. As a result of these arrangements, many of the
variables that may affect our business, are not exclusively within our control. We also compete for partners with
other leading speciality chemicals companies that may have more visibility, greater brand recognition and
financial resources, and a broader product portfolio than we do. If our competitors provide greater incentives to
our partners, our partners may choose to promote the products of our competitors instead of our products. As a
result, our operations may be disrupted and our financial condition and results of operations could be adversely
affected.
17. Our business is dependent on our manufacturing facilities, and the loss or shutdown of operations at any
of our manufacturing facilities may have a material adverse effect on our business, financial condition
and results of operations.
A significant portion of our revenue was generated by sales of products produced at our manufacturing facilities
in India, Italy, Mexico and Brazil. Our manufacturing facilities can be substantially interrupted or perform below
expected levels of output or efficiency due to a number of factors, many of which are outside of our control,
including fire, flood, earthquakes, power outages, fuel shortages, breakdown or failure of equipment, terrorist
attacks or wars, or other natural disasters, as well as obsolescence, labour disputes, strikes, lock-outs and industrial
accidents. For example, in past we have experienced fire outbreak at our manufacturing facilities in Tarapur,
Maharashtra which lead to interruptions in the running of the factory and a casualty at our manufacturing facility
in Italy pursuant to an accident which is currently being investigated by local authorities. Our manufacturing
facilities are also subject to operating risks arising from compliance with the directives of relevant government
authorities, as non-compliance may lead to a loss of licenses, certifications and permits. Our business, financial
condition and results of operations may be materially and adversely affected by any prolonged disruption or
shutdown of operations at our manufacturing facilities, including due to any of the factors mentioned above or
due to any political or country risks described elsewhere herein.
18. Volatility in exchange rate fluctuations may adversely affect our results of operations.
Our financial statements are prepared in Indian rupees. However, substantially portion of our sales and
expenditures occur in markets outside of India and in each market’s respective local currency, including the US
dollar, Euro, Mexican Peso and Brazilian Real, among others. The exchange rates in particular between the Indian
rupee and the US dollar have varied substantially in recent years and may continue to fluctuate significantly in
the future. In preparing our financial statements, we translate revenue and expenses in our markets outside India
39
from their local currencies into Indian rupees using the exchange rates prevailing at the time of such transactions.
If the Indian rupee strengthens relative to local currencies, our reported revenue, gross profit and net income will
be reduced to that effect. Further, a significant portion of our raw material costs are in foreign currency. Therefore,
foreign currency fluctuations can also result in losses and gains resulting from translation of foreign currency
denominated balances on our balance sheet. Exchange rate fluctuations could affect the amount of income and
expenditure we recognize or our ability to service our debt obligations. Given the complex global political and
economic dynamics that affect exchange rate fluctuations, it is difficult to predict future fluctuations and the effect
these fluctuations may have adverse effect upon future reported results or our overall financial condition. Further,
we have availed certain credit facilities in foreign currencies and any fluctuation in the currency exchange rate
may increase our repayment obligations. Significant currency exchange rate fluctuations and currency
devaluations could have an adverse effect on our results of operations from period to period.
19. The shareholders agreement entered into between our CFS Mexico, Controladora and Dresen Mexico
imposes certain restriction on business operations.
CFS Mexico has entered into a shareholders agreement dated May 4, 2016 (the “SHA”) with Controladora and
Dresen Mexico. In terms of the SHA, certain corporate actions such as merger and acquisition, change of object,
issue of security, loans and security creation over USD 50,000 etc. (“Major Actions”) require unanimous votes
of all the directors of Dresen Mexico or approval of at least 75% of the shareholders of Dresen Mexico, which
shall include at least one vote of Controladora, in a general meeting. We cannot assure that we will be able to
obtain consent/approval from Controladora on the Major Action and our failure to obtain such consent/approval
may affect implementation of growth strategy, our business, prospects, results of operations and financial
condition.
20. The ability of our Subsidiaries to pay dividend is restricted by certain covenants in their financing
documents and investment agreements.
Our Subsidiaries have entered into financing documents with certain banks which requires our Subsidiaries to
take prior approval of the lender for declaring and distributing dividends. We cannot assure that the lenders of our
Subsidiaries will provide their consent for declaration and distribution of dividends by our Subsidiaries, as
applicable. Our inability to realize dividends from our Subsidiaries due to restrictive covenants in the financing
documents and investments agreements may adversely affect our cashflows, results of operations and financial
condition.
21. Certain shareholders of our Company have the right to nominate Directors on our Board/ Board
Committee, which may conflict with the interest of the other shareholders.
Some of our Company’s Shareholders namely, (i) Subhash D Dandekar, Subhash D. Dandekar (HUF), Rajani S.
Dandekar, Anagha Dandekar and Ashish S. Dandekar (the “Group A”); (ii) Leena Dandekar, Abha A. Dandekar
and Vivek A. Dandekar (the “Group B”); and (iii) Dilip D. Dandekar, Dilip D. Dandekar (HUF), Rahul D.
Dandekar, Aditi D. Dandekar, Ketki A. Sawant and DDI Consultants Private Limited (the “Group C”), have the
right to nominate Directors on our Board/ Board Committee pursuant to their shareholding in our Company and
Articles. In terms of the Articles, Group A and Group B shall have the following right till the Shareholders of the
respective group collectively hold at least 60,00,000 Equity Shares – (i) nomination of one Executive Director,
who will have a seat on the Strategic Business/Investment Committee; and (ii) right to nominate a member from
Group A or Group B on board of directors of each of the Subsidiaries. In terms of the Articles, Shareholders of
Group C, till they collectively hold 20,00,000 Equity Shares, shall have the right to appoint one Non-Executive
Director, who shall be liable to retire by rotation. The aforesaid right to appoint Directors on the Board/Board
Committee may conflict with the choice of the other Shareholders in appointing Directors on the Board. Further,
decisions voted for or against by such nominee Directors in Board meetings may be for the interest of Group A,
Group B and Group C, respectively, which may conflict with the interest of the other Shareholders.
22. The erstwhile share transfer and registrar of the Company, Sharepro Services (India) Private Limited.
(“Sharepro”) has been temporarily restrained by SEBI from accessing securities market.
Sharepro, erstwhile share transfer and registrar of the Company, has been recently found to have committed fraud
for which Sharepro has been temporarily restrained by SEBI from buying, selling, or dealing in the securities
market or associating themselves with securities market, in any manner. The Company is not aware of any fraud
in relation to the services provided by Sharepro to the Company; however, if such fraud were to be discovered in
the future, the Company may get involved into regulatory and other legal proceedings, adverse outcome of which
may involve penalty, suspension, imprisonment of convicted persons involved in the fraud, which may adversely
40
affect our business operations and financial position. Our Company is in the transition phase of changing the share
transfer and registrar of the Company and in this regard, our Company has appointed Link Intime India Private
Limited, effective from June 20, 2016.
23. We may undertake strategic acquisitions, which may prove to be difficult to integrate and manage or may
not be successful.
We have, in the recent past, pursued acquisitions and strategic partnerships as part of our growth strategy. Our
subsidiary, namely CFS Mexico has also recently acquired 65 % of shareholding in Dresen Mexico. We may
make further acquisitions or investments, including in geographies in which we do not currently operate, to expand
our access to large clients, acquire new service offerings, or enhance our technical or research capabilities. Our
acquisitions may not contribute to our profitability, and we may be required to incur or assume debt, or assume
contingent liabilities, as part of any acquisition. We may not successfully identify suitable acquisition candidates
or joint venture opportunities. We also might not succeed in completing targeted transactions or achieve desired
results of operations. We could have difficulty in assimilating the personnel, operations, technology and
manufacturing units of the acquired company. These difficulties could disrupt our ongoing business, distract our
management and employees and increase our expenses. In addition, we might need to dedicate additional
management and other resources, and our organizational structure could make it difficult for us to efficiently
integrate acquired businesses into our ongoing operations and assimilate and retain employees of those businesses
into our culture and operations. Business combination and investment transactions may result in significant costs
and expenses and charges to earnings, including those related to severance pay, early retirement costs, employee
benefit costs, goodwill and asset impairment charges, assumed litigation and other liabilities, and legal, accounting
and financial advisory fees. We may have difficulties as a result of entering into new markets where we have
limited or no direct prior experience or where competitors may have stronger market positions. We might fail to
realise the expected benefits or strategic objectives of any acquisition we undertake. We might not achieve our
expected return on investment or may lose money.
Further, as a result of our growth strategy to continue geographic expansion, we are more susceptible to certain
risks. For instance, when we enter a new country, we are exposed to generating revenue in a new currency for
which we may not be able to hedge against fluctuations in foreign currency. In some countries we could be subject
to strict restrictions on the movement of cash and the exchange of foreign currencies, which could limit our ability
to use this cash across our global operations. Acts of terrorist violence, armed regional and international hostilities
and international responses to these hostilities, natural disasters, global health risks or pandemics or the threat of
or perceived potential for these events could have a negative impact on our business. These events could adversely
affect our clients’ levels of business activity and precipitate sudden significant changes in regional and global
economic conditions and cycles. These events also pose significant risks to our people and to physical facilities
and operations around the world, whether the facilities are ours or those of our alliance partners or clients. By
disrupting communications and travel and increasing the difficulty of obtaining and retaining highly skilled and
qualified personnel, these events could make it difficult or impossible for us to deliver services to our clients.
24. We may be subject to claims of infringement of third-party intellectual property rights, which could
adversely affect our business.
While we take care to ensure that we comply with the intellectual property rights of third parties, we cannot
determine with certainty whether we are infringing upon any existing third-party intellectual property rights. Any
claims of intellectual property infringement from third parties, regardless of merit or resolution of such claims,
could force us to incur significant costs in responding to, defending and resolving such claims, and may divert
the efforts and attention of our management and technical personnel away from our business. The risk of being
subject to intellectual property infringement claims will increase as we continue to expand our operations and
product offerings. As a result of such infringement claims, we could be required to pay third party infringement
claims, alter our technologies, obtain licenses or cease some portions of our operations. The occurrence of any of
the foregoing could result in unexpected expenses. In addition, if we are required to alter our technologies or
cease production of affected items, our revenue could be adversely affected.
25. If we are unable to adequately protect our intellectual property, or if the scope of our intellectual property
fails to sufficiently protect our proprietary rights, other companies could compete against us more directly,
which may have a material adverse impact on our business and results of operations.
Our commercial success depends in part on our ability to protect our existing intellectual property and to obtain
other intellectual property rights. Please see “Business – Intellectual Property” on page 83 for further details of
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our material intellectual property. If we do not adequately protect our intellectual property, competitors may be
able to imitate our products, use our technologies and erode or negate any competitive advantage we may have,
which could harm our business and ability to achieve profitability. Furthermore, we cannot assure you that any
of our pending patent applications will mature into granted patents, or that such patents, if issued, will provide
us with adequate proprietary protection or competitive advantages.
We have not applied for trademark registration of the name of our Company. We have applied for trademark
registration for our Company’s logo under various classes of the Trademarks Act, 1999, with the Registrar of
Trademarks. Further, certain of our trademarks, including those for products which we currently sell, could be
unregistered, expired, removed, opposed, withdrawn, refused, objected or are otherwise under dispute. If any of
our unregistered trademarks are registered in favour of a third party, we may not be able to claim registered
ownership of such trademarks, and consequently, we may be unable to seek remedies for infringement of those
trademarks by third parties other than relief against passing off by other entities. We also have been granted three
patents, each in India, Europe and South Africa. We have also applied for a process patent for generating a mixed
multicomponent vapour for preparation of Monoalkyl Ethers of Diphenols in India. Our inability to obtain or
maintain and defend infringement of these registrations may adversely affect our competitive business position.
Detecting and policing unauthorized use of proprietary technology are difficult and expensive. We may need to
resort to litigation to enforce or defend patents issued to us or determine the enforceability, scope and validity of
our proprietary rights or those of others. An adverse determination in any such litigation could materially impair
our intellectual property rights. If our intellectual property rights are inadequate as a result of the narrow scope
of the patents granted or third parties' infringement, or we otherwise fail to sufficiently protect our intellectual
property, our business, financial condition and results of operations could be adversely affected.
26. Our insurance coverage is limited; if we experience uninsured losses, it could adversely affect our financial
condition and results of operations.
Our insurance coverage is limited. Please see “Business–Insurance” on page 82 for further details of our insurance
coverage. If we experience product liability claims, disruptions to our business, damage to our manufacturing
facilities or other assets or if key persons cease to provide their services to us for any reason, we might incur
substantial costs and loss or may be unable to replace such key persons in a timely manner or at all, the damages
which may not be fully covered by insurance. In addition, there are certain types of losses, such as losses from
war, acts of terrorism, typhoons, and other natural disasters for which we cannot obtain insurance at a reasonable
cost or at all. Further, there cannot be any assurance that claims for damages made to insurer will be fully accepted.
Insurance companies generally tend to settle a lower claim than the actual claim for damage. In past, we had
suffered damages because of a fire outbreak in our manufacturing facility at Tarapur, Maharashtra. Although we
had made claims for the entire damages suffered, our claim was accepted only to the extent of approximately
74%. Should an uninsured loss or a loss in excess of insured limits occur, we could suffer financial losses, lose
all or a portion of our production capacity, as well as future revenue anticipated to be derived from the
manufacturing activities, which could result in adversely affecting our financial condition and results of
operations.
27. Restrictions imposed in the secured credit facilities and our other outstanding indebtedness may limit our
ability to operate our business and to finance our future operations or capital needs or to engage in other
business activities.
As of March 31, 2016, we had aggregate loans, both secured and unsecured, short term and long term (including
current maturities), of Rs. 18,033.93 lakh on a consolidated basis. Most of our financing arrangements are secured
by our movable and immovable assets. Further, CFS Mexico has availed a credit facility of an amount of USD
5,850,000 from Exim Bank in April 2016 to finance the Dresen Acquisition, which is secured by pledge of entire
shareholding of CFS Mexico by our Company and pledge of shares of Dresen held by CFS Mexico. Our Company
has also pledged the entire shareholding in CFS Mauritius to Exim bank for various credit facilities availed by
our Company and CFS Europe. Further, our Company has provided corporate guarantees to secure various loans
availed by the Subsidiaries.
Our financing agreements generally include various conditions and covenants that require us to obtain lender
consents prior to carrying out certain activities and entering into certain transactions and also covenants such as
(a) changing the capital structure of our Company including change in shareholding of the Promoters; (b)
formulating any scheme of amalgamation or reconstruction; (c) undertaking any new project, implementation of
any scheme of expansion or acquisition of capital assets; (d) declaring dividend except out of profits of that year;
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(e) change in the management set-up; (f) undertaking any guarantee obligations on behalf of any third party; (g)
investments by way of share capital in or lend to any other concern; and (h) any amendments to the Memorandum
and Articles of our Company. These restrictions may limit our flexibility in responding to business opportunities,
competitive developments and adverse economic or industry conditions. A breach of any of these covenants, or
a failure to pay interest or indebtedness when due under any of our credit facilities, could result in a variety of
adverse consequences, including the acceleration of our indebtedness, and could adversely affect our ability to
conduct our business.
Our financing agreements also generally contain certain financial covenants including the requirement to
maintain, among others, specified debt-to-equity ratios. These covenants vary depending on the requirements of
the financial institution extending the loan and the conditions negotiated under each financing document. Such
covenants may restrict or delay certain actions or initiatives that we may propose to take from time to time. There
can be no assurance that we will comply with the covenants with respect to our financing arrangements in the
future or that we will be able to secure waivers for any such non-compliance in a timely manner or at all.
Any future inability to comply with the covenants under our financing arrangements or to obtain necessary
consents required thereunder or any other breach under the financing agreements including default in repayment
may lead to the termination of our credit facilities, levy of penal interest, acceleration of all amounts due under
such facilities and the enforcement of any security provided. If the obligations under any of our financing
agreements are accelerated, we may have to dedicate a substantial portion of our cash flow from operations to
make payments under such financing documents, thereby reducing the availability of cash for our working
capital requirements and other general corporate purposes. Further, during any period in which we are in default,
we may be unable to raise, or face difficulties raising, further financing. Any of these circumstances or other
consequences could adversely affect our business, credit rating, prospects, results of operations and financial
condition. Moreover, any such action initiated by our lenders could adversely affect the price of the Equity
Shares.
Our ability to make payments on our indebtedness will depend on our future performance and our ability to
generate cash, which to a certain extent is subject to general economic, financial, competitive, legislative, legal,
regulatory and other factors, many of which are beyond our control. If our future cash flows from operations and
other capital resources are insufficient to pay our debt obligations, meet our contractual obligations, or to fund
our other liquidity needs, we may be forced to sell assets or attempt to restructure or refinance our existing
indebtedness. Any refinancing of our debt could be at higher interest rates and may require us to comply with
more onerous covenants, which could further restrict our business operations. The terms of existing or future
debt instruments may restrict us from adopting some of these alternatives. In addition, any failure to make
payments of interest and principal on our outstanding indebtedness on a timely basis would likely result in a
reduction of our creditworthiness and/or any credit rating we may hold, which could harm our ability to incur
additional indebtedness on acceptable terms.
28. We face intense competition from both global and local speciality chemicals companies, which could
significantly limit our growth and materially adversely affect our financial results.
The speciality chemicals industry is competitive. The principal competitive factors in this industry include:
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introduction of substitute products by a competitor at a lower price;
pricing pressures by competitors and customers;
a company’s reputation as a manufacturer and distributor of quality products;
a company’s level of service (including maintaining sufficient inventory levels for timely deliveries);
product appearance and labelling; and
a company’s breadth of product offerings
Many of our competitors have longer operating histories and greater financial, research and development,
marketing and other resources than we do. Consequently, many of our competitors may be able to develop
products and/or processes competitive with, or superior to, our own. Furthermore, we may not be able to
differentiate our products from those of our competitors; to successfully develop or introduce new products on a
timely basis or at all that are less costly than those of our competitors; or to offer customers payment and other
commercial terms as favourable as those offered by our competitors. Our competitors include large speciality
chemical companies abroad. These companies, among others, compete with us for majority of our products. If our
competitors outperform our business and develop superior products at a lesser cost in a timely manner, our growth
and financial results could be adversely affected.
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29. We have been involved in certain legal and other proceedings in the past and may become involved in
litigations in the future, which could have adverse effects on our business.
We are currently involved in certain outstanding litigations primarily with respect to property disputes,
outstanding credit and tax demands. Litigations are generally, regardless of the merits or eventual outcome, are
costly and time consuming and we could incur significant costs and/or a significant reduction in revenue in
defending the action.
We cannot assure you that these legal proceedings will be decided in our favour. Although presently, as per the
Policy for Determination of Materiality for Disclosure of Events/Information, as adopted by the Board on
February 12, 2016, there are no material litigation, we cannot assure you that we will not be involved in material
legal proceedings in the future, including civil, criminal, consumer, intellectual property and tax-related
litigations. Litigations can divert significant management time and attention, and consume significant financial
resources in their defense or prosecution. In addition, if any proceeding in which we may be involved in and is
decided against us, or if penalties are assessed and/or sanctions imposed on us in the future, it may have a material
adverse effect on our businesses and reputation and financial conditions.
Further, there was an accident at our manufacturing facility in Italy which had resulted in one casualty and
presently, the local authorities are carrying on an investigation. Any adverse findings by such authorities can, in
addition to monetary penalties being imposed, lead to civil or criminal litigation and require us to incur significant
cost.
30. We are subject to anti-dumping regulations, which may adversely affect our revenue and business
operations.
We are subject to anti-dumping regulations under international trade laws in relation to export of our products. If
we export our products at a lesser price than the local suppliers in the importing country, we may be subject to
anti-dumping duties, which may increase the pricing of our products, adversely affecting our business operations
and revenue. In 2014, pursuant to an application made by a local supplier in China to the Ministry of Commerce
of the People’s Republic of China, China had imposed anti-dumping duties on TBHQ. The duty imposed had
significant impact on our pricing of TBHQ, which had adversely affected our business operations and revenue.
Further, it had reduced our competitive edge in relation to pricing of TBHQ over local suppliers in China. We
cannot assure that we will not be subject to such anti-dumping duties in future by countries where we export our
products.
31. Restrictions on import of raw materials and an increase in shipment cost may adversely impact our
business and results of operations.
Our raw material imports are regulated by the Manufacture, Storage and Import of Hazardous Chemical Rules,
1989 that, inter alia, allows the concerned authority to stop any import if it is deemed that the chemicals proposed
to be imported may cause major accidents. We are unable to assure you that such regulations would not be made
more stringent which would consequently restrict our ability to import raw materials from other jurisdictions. We
also cannot assure you that, under these circumstances, we will be successful in identifying alternate suppliers for
raw materials or we will be able to source the raw materials at favorable terms in a timely manner. Any restriction
on import of raw materials could have an adverse effect on our ability to deliver products to our customers,
business and results of operations.
32. If the proposed Dahej Manufacturing facility is not completed in a timely manner for any reason, our
ability to produce additional Diphenols could be materially adversely affected.
Our proposed Dahej manufacturing plant is set to increase our manufacturing capacity of Diphenols. We may
encounter change in strategy and plans for implementation of the project, significant delays, cost overruns,
engineering problems, equipment supply constraints or other unexpected difficulties which could cause
construction to cost more than we currently anticipate. These increased costs could require that we secure
additional funding. Such funds may be unavailable when we need them or on terms that are acceptable to us.
Furthermore, we may not be able to obtain the necessary regulatory approvals, including environment clearance,
to commence construction and commercial operations. Further, the facility may not perform as expected. For
example, production rates may vary from our expectations. We may need to install additional equipment to
achieve desired specifications, which could delay operations and increase costs. We may encounter these or other
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operational challenges and may be unable to devise workable and cost effective solutions, which could delay,
reduce or prevent our ability to produce Diphenols and could have a material adverse effect on our business,
financial condition or results of operations.
33. We depend upon our key managerial personnel, the loss of whom could adversely affect our operations. If
we fail to attract and retain the talent required for our business, our business could be materially harmed.
We depend to a significant degree on the principal members of our management, including our research and
development team. The loss of services from any of the persons from our management may significantly delay or
prevent the achievement of our product development or business objectives. We do not carry key man life
insurance on any key personnel other than for Ashish Dandekar. Our key employees may terminate his or her
employment at any time without notice or short notice and without cause or good reason, and we may have little
or no legal recourse to retain them. Our success depends upon our ability to attract and retain highly qualified
personnel. The loss of the services of senior management could seriously impair our ability to continue to manage
and expand our business. Our executives and researchers possess technical and business capabilities that may not
be easily replaceable. Competition among speciality chemicals companies for qualified employees is intense, and
the ability to attract and retain qualified individuals is critical to our success. We may not be able to attract and
retain these individuals on acceptable terms or at all, and our inability to do so could significantly impair our
ability to compete. If we lose the services of any of our personnel, executives or researchers for any reason, we
may be unable to replace them in a timely manner or at all, which may affect our ability to continue to manage
and expand our business.
34. Our performance may be adversely affected if we are not successful in managing our inventory or working
capital balances.
We evaluate our inventory balances of materials based on shelf life, expected sourcing levels, known uses and
anticipated demand based on forecasted customer order activity and changes in our product sales mix. Efficient
inventory management is a key component of the success of our business, results of operations and profitability.
To be successful, we must maintain sufficient inventory levels and an appropriate product sales mix to meet our
customers’ demands, without allowing those levels to increase to such an extent that the costs associated with
storing and holding other inventory adversely affects our results of operations. Our working capital requirements
may also increase if there is a change in payment terms we offer to our customers or enjoy from our suppliers. In
addition, our working capital requirements have increased in recent years due to the general growth of our
business. If a client defaults in making its payment as per our contractual arrangement, it may also affect our
profitability and liquidity and decrease the capital resources that are otherwise available for other uses. All of
these factors may result in increases in our working capital requirements. If we are unable to finance our working
capital needs, or secure other financing when needed, on acceptable commercial terms or at all, it may adversely
affect our business, growth prospects and results of operations.
35. Our Promoters will be able to exercise significant influence and control over our Company after the Issue
and may have interests that are different from those of our other shareholders.
As of March 31, 2016, our Promoters and promoter group hold 39.84% of the issued and outstanding Equity
Shares of our Company. By virtue of their shareholding, our Promoters will have the ability to exercise significant
control and influence over our Company and our affairs and business. The interests of our Promoters may be
different from or conflict with the interests of our other shareholders.
36. We may face labour disruptions that could interfere with our operations.
We are exposed to the risk of labour stoppages at our manufacturing plants. While some of our employees are
members of trade unions, we have not experienced difficulties with our labour relations in the past. However, we
cannot assure that we will not experience a strike, work stoppage or other industrial action in the future. Although
we believe that we have good industrial relations with our employees presently, there can be no assurance that
our employees will not undertake or participate in strikes, work stoppages or other industrial actions in the future.
Any labour disruptions may adversely affect our operations by delaying or slowing down our production,
increasing our cost of production or even halting a portion of our production. This may also cause us to miss sales
commitments, hurt our relationships with customers and disrupt our supply chain, further affecting our revenue
and margins.
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Additionally, we rely on certain third party contract manufacturers for the production of certain products. In the
event that there are disruptions in the manufacturing facilities of such third party contract manufacturers, it will
impact our ability to deliver such products and meet with our contractual commitments.
37. We require substantial financing for our business operations and business growth, and the failure to
obtain additional financing on terms commercially acceptable to us may adversely affect our ability to
grow and our future profitability.
We require substantial capital for our business operations and its growth. Debt financing could increase our
interest costs and require us to comply with additional restrictive covenants in our financing agreements.
Additional equity financing could dilute our earnings per Equity Share and your interest in the Company, and
could adversely impact the price of our Equity Shares. Our ability to obtain additional financing on favourable
terms, if at all, will depend on a number of factors, including our future financial condition, results of operations
and cash flows, the amount and terms of our existing indebtedness, general market conditions and market
conditions for financing activities and the economic, political and other conditions in the markets where we
operate. Further, we cannot assure you that we will be able to raise additional financing on acceptable terms in
a timely manner or at all. Our failure to renew arrangements for existing funding or to obtain additional financing
on acceptable terms and in a timely manner could adversely impact our planned capital expenditure and
implementation of growth strategy, our business, results of operations and financial condition.
38. Any failure of our information technology systems could adversely affect our business and our operations.
We have information technology systems that support our business processes, including sales, order processing,
production, distribution and finance. These systems may be susceptible to outages due to power loss,
telecommunications failures, software malfunction, break-ins and similar events. In addition, our proprietary data
is stored electronically and may be vulnerable to computer viruses, cybercrime and similar disruptions from
unauthorized tampering. If such unauthorized use of our systems were to occur, data related to our product
formulas, product development and other proprietary information could be compromised. The occurrence of any
of these events could adversely affect our operations of business, reputation and expose us to potential litigations.
39. We have in the past entered into related party transactions and may continue to do so in the future.
We have entered into certain transactions with related parties. While we believe that all such transactions have
been conducted on an arm’s length basis, there can be no assurance that we could not have achieved more
favourable terms had such transactions not been entered into with related parties. Furthermore, it is likely that we
may enter into related party transactions in the future. There can be no assurance that such transactions,
individually or in the aggregate, will not have an adverse effect on our financial condition and results of operations.
For further details on related party transactions, see “Financial Information” on page 157.
40. Our statutory auditors have included certain observations and emphasis of matter on certain matters in
their auditor’s reports.
Our statutory auditors for fiscal years 2016, 2015 and 2014 have provided certain observations and emphasis of
matter in their respective auditor’s reports. These matters include loans to subsidiary, writing off inter corporate
loans, recovery of loans granted, overdue of deferred sales tax loan, failure to earmark available free liquid assets
as per Companies (Acceptance of Deposits) Rules, 1975 and term loans availed by the Company not applied for
the purpose for which they were availed. For details on the matters of emphasis and steps taken by our Company,
see “Legal Proceedings” on page 152. Investors should consider the same in evaluating our financial position,
results of operations and cash flows.
41. Our registered office, corporate office and some of our manufacturing facilities are not owned by our
Company.
Our registered and corporate office is situated at WICEL, Plot No. F/11 and F/12, Central Road, Opposite SEEPZ
Main Gate, Andheri (East), Mumbai 400 093. We do not own our registered office premises. We have entered
into a lease agreement dated November 9, 2014 with M/s Texport Industries Private Limited for leasing of our
registered office for a period till October 31, 2019 with a right of renewal for another two years. Further, some of
our manufacturing facilities are on leasehold premises. We cannot assure that once the lease period is over, we
will be able to renew the lease period at favourable terms or at all. Upon expiration or termination of the lease, in
case we are unable to renew the lease period, we cannot assure that we will be able to find a similar office premises
46
on leasehold basis in and around the same location at commercially favourable terms and in a timely manner. This
may lead to disruption of our business operations.
42. Our Company has experienced negative cash flows during the last three financial years. Any negative cash
flows in future could adversely affect our business and financial conditions.
We had negative cash flows from our investing and financing activities in the last three financial years. The table
below summarizes our cash flows for the financial years 2016, 2015 and 2014:
(In Rs, lakh)
Particulars
FY 2016
FY 2015
FY 2014
Cash flow from operating activities
7,157.24
4,625.51
2,674.23
Net Cash used in investing activities
(6,577.87)
(2,628.32)
(3,215.58)
Net Cash used in financing activities
(675.92)
(1,547.70)
(452.71)
Net increase / (decrease) in cash
(96.55)
449.49
(994.06)
Any negative cash flows in future may adversely affect our business.
43. Our ability to pay dividends in the future will depend upon future earnings, financial condition, cash flows
and working capital requirements.
Our ability to pay dividends to our shareholders will depend upon our future earnings, financial condition, cash
flows, planned capital expenditures and working capital requirements. For fiscal year 2015, our Company paid a
dividend of Rs. 0.45 per Equity Share and the amount of dividend declared and paid excluding dividend
distribution tax was Rs. 431.50 lakh. For details, see “Dividend Policy” on page 60. We may be unable to pay
dividends in the near or medium term, and the future dividend payout will depend on our planned capital
expenditures and working capital requirements, financial condition, results of operations and cash flows.
44. We are dependent on third parties for the supply of utilities and transportation of goods and any disruption
in this regard could adversely affect our manufacturing operations.
We procure utilities such as water, natural gas and electricity from third parties for use at our manufacturing units.
We also engage third party transport service providers for transportation of our products. Reliance on third parties
for such services exposes us to risks such as shortage or break down in supply, delay in transportation, the
correction of which is in the hands of such third parties. Any breakdown of our relationship with any of our
service/utility providers could adversely affect our operations. In case of a break-down of our relationship with
the service/utility providers, we are unable to assure you that we shall be able to source such utilities from alternate
sources in a timely manner, which could adversely affect our operations and results.
45. We have contingent liabilities and our financial condition could be adversely affected if any of these
contingent liabilities materializes.
As of March 31, 2016, contingent liabilities disclosed in our consolidated financial information aggregated to Rs.
6,216.56 lakh. Our contingent liabilities are mainly on account of bills of exchange, cheques discounted with
bankers, bank guarantees issued to various tax authorities and tax disputes. If any of these contingent liabilities
materialize, our financial condition and results of operation may be adversely affected. For further details, see
“Financial Information” on page 157.
External risk factors
46. After this Issue, our Equity Shares may experience price and volume fluctuations or an active trading
market for our Equity Shares may not develop.
The Issue Price of the Equity Shares in this Issue will be determined by our Company in consultation with the
Book Running Lead Managers based on the applications received in compliance with Chapter VIII of the SEBI
Regulations, and it may not necessarily be indicative of the market price of the Equity Shares after this Issue is
complete. You may be unable to resell your Equity Shares at or above the Issue Price and, as a result, you may
lose all or part of your investment. The price at which the Equity Shares will trade after this Issue will be
determined by the marketplace and may fluctuate after this Issue as a result of several factors, including:
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volatility in the Indian and global securities markets;
an assessment of our management, our past and present operations, and the prospects for, and timing of, our
future revenues and cost structures;
the present state of our development;
the results of our operations and our financial condition;
the performance and financial condition of our competitors;
the history of, and the prospects for, our business and the sectors in which we compete,
adverse media reports on us or the sector in which we operate;
changes in the estimates of our performance or recommendations by financial analysts;
significant developments in India’s economic liberalization and deregulation policies; and
significant developments in India’s fiscal regulations.
In addition, the Indian stock market has from time to time experienced significant price and volume fluctuations
that have affected the market prices for the securities of Indian companies. As a result, investors in the Equity
Shares may experience a decrease in the value of the Equity Shares regardless of our operating performance or
prospects.
47. We cannot guarantee that the Equity Shares issued under this Issue will be listed on the Stock Exchanges
in a timely manner, if at all.
In accordance with Indian law and practice, after our Board or committee passes the resolution to allot the Equity
Shares but prior to crediting such Equity Shares into the Depository Participant accounts of the QIBs, we are
required to apply to the Stock Exchanges for listing and trading approvals. After receiving the listing and trading
approvals from the Stock Exchanges, we will credit the Equity Shares into the Depository Participant accounts of
the respective QIBs and apply for the final listing and trading approvals from the Stock Exchanges. There could
be a delay in obtaining these approvals from the Stock Exchanges, which in turn could delay the listing of the
Equity Shares on the Stock Exchanges. Any delay in obtaining these approvals would restrict your ability to
dispose of your Equity Shares.
48. An investor will not be able to sell any of the Equity Shares other than on a recognized Indian stock
exchange for a period of 12 months from Allotment under this Issue.
The Equity Shares are subject to restrictions on transfers. Pursuant to the SEBI ICDR Regulations, for a period of
12 months from the date of the Allotment of the Equity Shares, QIBs subscribing to the Equity Shares may only
sell their Equity Shares on the Stock Exchanges. We cannot be certain that these restrictions will not have an
impact on the price and liquidity of the Equity Shares.
49. The exit by the United Kingdom from the European Union has and could further impact global financial
markets which could in turn adversely affect the trading prices of our Equity Shares.
The exit by the United Kingdom from the European Union (“EU”) may impact the trading prices of our Equity
Shares. As a result of the referendum held in the United Kingdom on June 23, 2016, which resulted in a vote in
favour of the exit from the EU, the global financial markets have experienced significant volatility and may
continue to experience volatility. In addition, the United Kingdom and member countries in the EU may face
increased economic and financial volatility. Such economic and financial volatility may further impact global
financial markets, which may adversely affect the trading prices of our Equity Shares.
50. Any future issuance of the Equity Shares or sales of the Equity Shares by any of our significant
shareholders may adversely affect the trading price of the Equity Shares.
A future issuance of Equity Shares by us may dilute your shareholding in our Company. There are no restrictions
on our ability to issue further Equity Shares, including allotment of any securities to the Promoters, other than as
stipulated under applicable laws. The issue and allotment of Equity Shares by us to third parties would result in a
dilution of your shareholding and rights in our Company.
Moreover, any significant disposal of Equity Shares by any of our significant shareholders, or the perception that
such sales will occur, may affect the trading price of our Equity Shares. As a publicly traded company, there is no
restriction on our shareholders to dispose of a part or the entirety of their shareholding in our Company, which
could lead to a negative sentiment in the market regarding us that could in turn impact the value of the Equity
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Shares.
51. Since our Equity Shares are quoted in Indian rupees in India, foreign investors may be subject to potential
losses arising out of exchange rate risk on the Indian rupee and risks associated with the conversion of
Indian rupee proceeds into foreign currency.
Foreign investors are subject to currency fluctuation risk and convertibility risk since our Equity Shares are quoted
in Indian rupees on the Indian Stock Exchanges on which they are listed. Dividends on our Equity Shares will
also be paid in Indian rupees. Investors that seek to convert the Indian rupee proceeds of a sale of equity shares
into foreign currency and export the foreign currency, will need to obtain the approval of the RBI for each such
transaction. Holders of Indian rupees in India may also generally not purchase foreign currency without general
or special approval from RBI.
52. There are restrictions on daily movements in the price of the Equity Shares, which may adversely affect a
shareholder’s ability to sell, or the price at which it can sell, Equity Shares at a particular point in time.
We are subject to a daily circuit breaker imposed by all stock exchanges in India which does not allow transactions
beyond certain volatility in the price of the Equity Shares. This circuit breaker operates independently of the indexbased market-wide circuit breakers generally imposed by SEBI on Indian stock exchanges. The percentage limit
on our circuit breaker is set by the stock exchanges based on the historical volatility in the price and trading volume
of the Equity Shares. The stock exchanges do not inform us of the percentage limit of the circuit breaker from
time to time, and may change it without our knowledge. This circuit breaker effectively limits the upward and
downward movements in the price of the Equity Shares. As a result of this circuit breaker, there can be no
assurance regarding the ability of shareholders to sell the underlying Equity Shares or the price at which
shareholders may be able to sell their Equity Shares at a particular time.
53. Political instability or a change in economic liberalization and deregulation policies could seriously harm
business and economic conditions in India generally and our business in particular.
The Government of India has traditionally exercised and continues to exercise influence over many aspects of the
economy. The business and the market price and liquidity of the Equity Shares may be affected by interest rates,
changes in Government policy, taxation, social and civil unrest and other political, economic or other
developments in or affecting India. The Government of India has in recent years sought to implement economic
reforms and the current government has implemented policies and undertaken initiatives that continue the
economic liberalization policies pursued by previous governments. There can be no assurance that liberalization
policies will continue in the future. The rate of economic liberalization could change, and specific laws and
policies affecting the information technology sector, foreign investment and other matters affecting investment in
the securities could change as well. Any significant change in such liberalization and deregulation policies could
adversely affect business and economic conditions in India, generally, and our business, prospects, financial
condition and results of operations, in particular.
54. The Public companies in India, including us, may be required to prepare financial statements under IFRS
or a variation thereof, IND-AS. The transition to IND-AS in India is still at an early stage and we may be
adversely affected by this transition.
We currently prepare our annual and interim financial statements under Indian GAAP. Companies in India,
including ourselves, will be required to prepare annual and interim financial statements under Indian Accounting
Standard 101 “First-time Adoption of Indian Accounting Standards (“Ind-AS”). On January 2, 2015, the Ministry
of Corporate Affairs, Government of India (the “MCA”) announced the revised roadmap for the implementation
of Ind-AS (on a voluntary as well as mandatory basis) for companies other than banking companies, insurance
companies and non-banking finance companies through a press release (the “Press Release”). Further, on
February 16, 2015, the MCA has released the Companies (Indian Accounting Standards) Rules, 2015 (the “Ind
AS Rules”) which have come into effect from April 1, 2015. The Ind AS Rules provide for voluntary adoption of
Ind AS by companies in Fiscal 2015. Ind-AS will also be required to be implemented on a mandatory basis by
such companies that meet certain net worth criteria.
There is not yet a significant body of established practice on which to draw informing judgments regarding its
implementation and application. Additionally, Ind-AS differs in certain respects from IFRS and therefore financial
statements prepared under Ind-AS may be substantially different from financial statements prepared under IFRS.
There can be no assurance that our financial condition, results of operation, cash flow or changes in shareholders’
equity will not be presented differently under Ind-AS than under Indian GAAP or IFRS. When we adopt Ind-AS
49
reporting, we may encounter difficulties in the ongoing process of implementing and enhancing our management
information systems. There can be no assurance that the adoption of Ind-AS by us will not adversely affect its
results of operation or financial condition.
55. Rights of shareholders under Indian law may be more limited than under the laws of other jurisdictions.
Our Articles of Association and applicable law govern our corporate affairs. Legal principles related to these
matters and the validity of corporate procedures, directors' fiduciary duties and liabilities, and shareholders' rights
may differ from those that would apply to a company incorporated under the laws of another jurisdiction.
Shareholders' rights under Indian law may not be as extensive as shareholders' rights under the laws of other
countries or jurisdictions. Consequently, investors may have more difficulty in asserting their rights as shareholder
in an Indian company than as shareholder of a corporation incorporated under the laws of another jurisdiction.
56. The proposed new taxation system in India could adversely affect our business and the trading price of the
Equity Shares.
The Government has proposed two major reforms in Indian tax laws, namely the goods and services tax and
provisions relating to GAAR.
As regards the implementation of the goods and service tax and the direct tax code, the Government has not
specified any timeline for their implementation. The goods and services tax would replace the indirect taxes on
goods and services such as central excise duty, service tax, customs duty, central sales tax, state VAT, surcharge
and excise currently being collected by the central and state governments. As regards GAAR, the provisions have
been introduced in the Finance Act, 2012 which shall come into effect from April 1, 2017. The GAAR provisions
intend to catch arrangements declared as “impermissible avoidance arrangements”, which is any arrangement, the
main purpose or one of the main purposes of which is to obtain a tax benefit and which satisfy at least one of the
following tests (i) creates rights, or obligations, which are not ordinarily created between persons dealing at arm’s
length; (ii) results, directly or indirectly, in misuse, or abuse, of the provisions of the Income Tax Act, 1961; (iii)
lacks commercial substance or is deemed to lack commercial substance, in whole or in part; or (iv) is entered into,
or carried out, by means, or in a manner, which are not ordinarily employed for bona fide purposes. If GAAR
provisions are invoked, then the tax authorities have wide powers, including denial of tax benefit or a benefit
under a tax treaty. As the taxation system is intended to undergo the said overhaul, its consequent effects on our
Company cannot be determined at present and there can be no assurance that such effects would not adversely
affect our business, future financial performance and the trading price of the Equity Shares.
57. Our ability to raise foreign capital may be constrained by Indian law. The limitations on foreign debt may
have an adverse impact on our business growth, financial condition and results of operations.
As an Indian company, we are subject to exchange controls that regulate borrowing in foreign currencies. Such
regulatory restrictions limit our financing sources and hence could constrain our ability to obtain financings on
competitive terms and refinance future indebtedness. In addition, it cannot be assured to the prospective investor
that the required approvals will be granted to us without onerous conditions, or at all. The limitations on foreign
debt may have an adverse impact on our business growth, financial condition and results of operations.
58. Investors may be subject to Indian taxes arising out of capital gains on the sale of our Equity Shares.
Under current Indian tax laws, capital gains arising from the sale of the Equity Shares within 12 months in an
Indian company are generally taxable in India. Any gain realized on the sale of listed Equity Shares on a stock
exchange held for more than 12 months will not be subject to capital gains tax in India if Securities Transaction
Tax (“STT”) has been paid on the transaction. STT will be levied on and collected by a domestic stock exchange
on which the Equity Shares are sold. Any gain realized on the sale of the Equity Shares held for more than 12
months to an Indian resident, which are sold other than on a recognized stock exchange and on which no STT has
been paid, will be subject to long term capital gains tax in India. Further, any gain realized on the sale of listed
Equity Shares held for a period of 12 months or less will be subject to short-term capital gains tax in India. Capital
gains arising from the sale of our Equity Shares will be exempt from taxation in India in cases where the exemption
from taxation in India is provided under a treaty between India and the country of which the seller is resident.
Generally, Indian tax treaties do not limit India’s ability to impose tax on capital gains. As a result, residents of
other countries may be liable for tax in India as well as in their own jurisdiction on a gain upon the sale of the
Equity Shares. The above statements are based on the current tax laws.
50
59. Our business and activities may affected by the recent amendments to the competition law in India.
The Parliament has enacted the Competition Act, 2002, as amended, (“Competition Act”) for the purpose of
preventing practices having an adverse effect on competition in the relevant market in India under the auspices of
the Competition Commission of India (“CCI”). Under the Competition Act, any arrangement, understanding or
action whether formal or informal which causes or is likely to cause an appreciable adverse effect on competition
is void and attracts substantial penalties. Any agreement among competitors which directly or indirectly involves
determination of purchase or sale prices, limits or controls production, or shares the market by way of geographical
area or number of customers in the relevant market is presumed to have an appreciable adverse effect on
competition in the relevant market in India and shall be void. Further, the Competition Act prohibits abuse of
dominant position by any enterprise. If it is proved that the contravention committed by a company took place
with the consent or connivance or is attributable to any neglect on the part of, any director, manager, secretary or
other officer of such company, that person shall also be guilty of the contravention and liable to be punished.
On March 4, 2011 the Government of India notified and brought into force the combination regulation (merger
control) provisions under the Competition Act with effect from June 1, 2011. The combination regulation
provisions require that acquisition of shares, voting rights, assets or control or mergers or amalgamations which
cross the prescribed asset and turnover based thresholds shall be mandatorily notified to and pre-approved by the
CCI. In addition, on May 11, 2011, the CCI issued the Competition Commission of India (Procedure in regard to
the transaction of business relating to combinations) Regulations, 2011 which sets out the mechanism for
implementation of the combination regulation provisions under the Competition Act. It is unclear as to how the
Competition Act and the CCI will affect the business environment in India.
If we are adversely impacted, directly or indirectly, by any provision of the Competition Act, or its application or
interpretation, generally or specifically in relation to any merger, amalgamation or acquisition proposed by us, or
any enforcement proceedings initiated by the CCI, either suo moto or pursuant to any complaint, for alleged
violation of any provisions of the Competition Act it may have a material adverse effect on our business, financial
condition and results of operations.
60. Terrorist attacks, civil unrests and other acts of violence in India and around the region could adversely
affect the financial markets, result in a loss of consumer confidence and adversely affect our business,
results of operations, financial condition and cash flows.
Terrorist attacks, civil unrests and other acts of violence or war in India and around the region may adversely
affect worldwide financial markets and result in a loss of consumer confidence and ultimately adversely affect
our business, results of operations, financial condition and cash flows.
61. Natural calamities could have a negative impact on the Indian economy and cause our business to suffer.
India has experienced natural calamities such as earthquakes, a tsunami, floods and drought in the past few years.
The extent and severity of these natural disasters determines their impact on the Indian economy. The erratic
progress of a monsoon would also adversely affect sowing operations for certain crops. Further prolonged spells
of below normal rainfall or other natural calamities in the future could have a negative impact on the Indian
economy, adversely affecting our business and the price of the Equity Shares.
62. Significant differences exist between Indian GAAP, used throughout our financial information and other
accounting principles with which investors may be more familiar.
As stated in the report of our auditors included in this Preliminary Placement Document, our financial statements
are prepared and presented in conformity with Indian GAAP, consistently applied during the periods stated, except
as provided in such reports, and no attempt has been made to reconcile any of the information given in this
Preliminary Placement Document to any other principles or to base it on any other standards. Indian GAAP differs
from accounting principles and auditing standards with which prospective investors may be familiar in other
countries, including IFRS.
Accordingly the degree to which the financial information included in this Preliminary Placement Document will
provide meaningful information is dependent on your familiarity with Indian GAAP and the Companies Act. Any
reliance by persons not familiar with Indian GAAP on the financial disclosures presented in this Preliminary
Placement Document should accordingly be limited.
51
63. Investors may have difficulty enforcing foreign judgments against us or our management.
We are a limited liability company incorporated under the laws of India. Substantially all of our Directors and key
management personnel are residents of India and a large part of our assets and such persons are located in India.
As a result, it may not be possible for investors to effect service of process upon us or such persons outside India,
or to enforce judgments obtained against such parties outside India.
Furthermore, it is unlikely that an Indian court would enforce foreign judgments if that court were of the view that
the amount of damages awarded was excessive or inconsistent with public policy. For further details, see
“Enforcement of Civil Liabilities” on page 13. A party seeking to enforce a foreign judgment in India is required
to obtain approval from RBI to execute such a judgment or to repatriate outside India any amount recovered. It is
uncertain as to whether an Indian court would enforce foreign judgments that would contravene or violate Indian
law.
64. Applicants to the Issue are not allowed to withdraw their bids after the Bid/Issue Closing Date.
In terms of the SEBI Regulations, applicants in the Issue are not allowed to withdraw their Bids after the Bid/Issue
Closing Date. The allotment of Equity Shares in this Issue and the credit of such Equity Shares to the applicant’s
demat account with depository participant could take approximately seven days and up to ten days from the
Bid/Issue Closing Date. However, there is no assurance that material adverse changes in the international or
national monetary, financial, political or economic conditions or other events in the nature of force majeure,
material adverse changes in the Company's business, results of operation or financial condition, or other events
affecting the applicant’s decision to invest in the Equity Shares, would not arise between the Bid/Issue Closing
Date and the date of allotment of Equity Shares in the Issue. The occurrence of any such events after the Bid/Issue
Closing Date could also impact the market price of the Equity Shares. The applicants shall not have the right to
withdraw their Bids in the event of any such occurrence without the prior approval of the SEBI. The Company
may complete the allotment of the Equity Shares even if such events may limit the applicants’ ability to sell the
Equity Shares after the Issue or cause the trading price of the Equity Shares to decline.
52
MARKET PRICE INFORMATION
The Equity Shares have been listed and are available for trading on the BSE and the NSE.
(i)
The following tables set forth the reported high, low and average market prices and the trading volumes
of the Equity Shares on the BSE and the NSE on the dates on which such high and low prices were
recorded for financial years ended March 2014, March 2015 and March 2016:
BSE
Financial
Year
High
(Rs.)
March
2014
March
2015
March
2016
38.25
120.15
118.35
Date of
High
March 31,
2014
September
1, 2014
June 29,
2015
Total
Volume on
date of High
(Number of
Equity
Shares
traded on the
date of high)
Total
Volume of
Equity
shares
traded on
the date of
high (Rs.
lakh)
Low
(Rs.)
3,13,080
120.61
15.00
81,464
97.49
39.75
6,36,227
773.55
77.25
Date of
low
April 8,
2013
April 7,
2014
February
26, 2016
Volume on
date of Low
(Number of
Equity
Shares
traded on
the date of
low)
Total
Volume of
Equity
shares
traded on
the on date
of low (Rs.
lakh)
Average
price
for the
year
(Rs.)
5,452
0.82
49,539
44,160
Total Volume of Equity
Shares traded in the
Financial Years
In number
(Rs. in
lakh)
20.22
33,55,638
852.71
20.11
77.36
2,19,07,206
16549.88
34.14
97.93
3,60,95,869
37,536.79
(Source: www.bseindia.com)
Note:
1. Average price is average of the closing prices for the period.
2. In case of two days with the same closing price, the date with the higher volume has been considered.
.
NSE
Financial
Year
High
(Rs.)
March
2014
March
2015
March
2016
-
101.15
118.40
Date of
High
February
4, 2015
June 29,
2015
Volume on
date of
High
(Number of
Equity
Shares
traded on
the date of
high)
-
Total
Volume
of Equity
shares
traded on
the date
of high
(Rs. lakh)
Low
(Rs.)
-
-
2,33,064
235.32
80.60
19,55,070
2,383.78
77.20
Date of
low
Volume on
date of Low
(Number of
Equity
Shares
traded on
the date of
low)
Total
Volume of
Equity
shares
traded on
the on date
of low (Rs.
lakh)
Average
price
for the
year
(Rs.)
-
-
37770
110574
March
26, 2015
February
26, 2016
Total Volume of Equity
Shares traded in the
Financial Years
In number
(Rs. in
lakh)
-
-
-
30.49
92.02
32,73,427
3076.92
85.45
97.92
12,39,81,334
129110.26
(Source: www.nseindia.com)
Notes:
1. Average price is average of the closing prices for the period.
2. In case of two days with the same closing price, the date with the higher volume has been considered
3. Company is listed on NSE since January 2015
(ii)
The following tables set forth the reported high, low and average market prices and the trading volumes
of the Equity Shares on the BSE and NSE on the dates on which such high and low prices were recorded
during each of the last six months:
BSE
Month Year
High
(Rs.)
Volume on
date of High Total Volume
(Number of
of Equity
Date of High
Equity
shares traded
Shares
on the date of
traded on the high (Rs. lakh)
date of high)
Low
(Rs.)
Date of low
Volume on Total Volume
date of Low
of Equity
(Number of shares traded
Equity Shares on the on date
traded on the of low (Rs.
date of low)
lakh)
Average
price for
the
month
(Rs.)
Monthly Total Volume
of Equity Shares traded
In number
(Rs. in
lakh)
May 2016
100.05
April 2016
105.70
March 2016
95.50
February
2016
January 2016
102.10
110.20
May 10, 2016
April 22,
2016
March 16,
2016
February 8,
2016
January 1,
2016
31,920
32.16
90.80
May 24, 2016
63,115
57.08
96.36
5,58,968
538.84
1,03,492
108.92
89.60
17,385
15.73
97.31
9,03,389
894.83
20,828
19.83
80.85
27,789
22.30
89.95
12,48,616
1,174.18
47,108
48.12
77.25
44,160
34.14
89.60
18,18,524
1,648.13
2,77,858
306.77
87.70
April 5, 2016
March 1,
2016
February 26,
2016
January 18,
2016
1,10,529
97.89
97.57
18,13,331
1,833.17
53
Month Year
December
2015
High
(Rs.)
107.80
Volume on
date of High Total Volume
(Number of
of Equity
Date of High
Equity
shares traded
Shares
on the date of
traded on the high (Rs. lakh)
date of high)
December 30,
2015
1,11,127
119.37
Low
(Rs.)
92.70
Date of low
December 14,
2015
Volume on Total Volume
date of Low
of Equity
(Number of shares traded
Equity Shares on the on date
traded on the of low (Rs.
date of low)
lakh)
53,150
49.26
Average
price for
the
month
(Rs.)
100.40
Monthly Total Volume
of Equity Shares traded
In number
(Rs. in
lakh)
25,11,791
2,556.35
(Source: www.bseindia.com)
NSE
Month Year
High
(Rs.)
Volume on
Total Volume
date of High
of Equity
(Number of
shares traded
Date of High
Equity
on the date of
Shares
high (Rs.
traded on the
lakh)
date of high)
Low
(Rs.)
Date of low
Volume on Total Volume
date of Low
of Equity
(Number of shares traded
Equity Shares on the on date
traded on the of low (Rs.
date of low)
lakh)
Average
price for
the
month
(Rs.)
Monthly Total Volume
of Equity Shares traded
In number
(Rs. in
lakh)
May 2016
100.40
April 2016
105.65
March 2016
95.35
February
2016
January 2016
102.05
110.20
December
2015
107.90
May 10, 2016
April 22,
2016
March 16,
2016
February 8,
2016
January 1,
2016
December 30,
2015
1,61,851
162.94
90.05
May 24, 2016
2,15,894
194.91
96.34
25,08,717
2,426.37
4,40,860
464.07
89.90
56,947
51.42
97.39
35,39,689
3,526.71
1,37,005
130.41
80.90
1,07,218
86.10
89.93
29,73,077
2,723.63
1,71,559
175.16
77.20
1,10,574
85.45
89.62
53,00,833
4,978.30
11,18,036
1,236.20
87.35
2,48,183
219.74
97.59
62,79,640
6,350.74
3,91,945
421.40
92.65
April 5, 2016
March 1,
2016
February 26,
2016
January 18,
2016
December 11,
2015
2,03,321
189.70
100.40
78,22,992
8,016.46
(Source: www.nseindia.com)
Notes:
1.
2.
High, low and average prices are based on the daily closing prices.
In case of two days with the same closing price, the date with the higher volume has been considered.
(iii)
The following table set forth the details of the number of Equity Shares traded and the volume of business
transacted during the last six months on the BSE and the NSE:
Period
Volume of Business Transacted
(In Rs. lakh)
Number of Equity Shares Traded
BSE
5,58,968
9,03,389
12,48,616
18,18,524
18,13,331
25,11,791
May 2016
April 2016
March 2016
February 2016
January 2016
December 2015
NSE
25,08,717
35,39,689
29,73,077
53,00,833
62,79,640
78,22,992
BSE
538.84
894.83
1,174.18
1,648.13
1,833.17
2,556.35
NSE
2,426.37
3,526.71
2,723.63
4,978.30
6,350.74
8,016.46
(Source: www.bseindia.com and www.nseindia.com)
(iv)
The following table sets forth the market price on the BSE and NSE on September 28, 2015, i.e., the first
working day following the approval of the Board of Directors for the Issue on September 25, 2015:
BSE
Open
100.90
High
101.85
Low
97.00
Number of Equity
Shares traded
97.45
87,657
Close
NSE
Turnover
(lakh )
87.00
Open
101.00
High
102.00
Low
96.80
Number of Equity
Shares traded
97.70
2,52,922
Close
Turnover
(Rs. lakh)
251.07
(Source: www.bseindia.com and www.nseindia.com)
Notes:
1.
The day immediately after the date of the Board Meeting being a holiday, the next trading day has been taken
into account
54
USE OF PROCEEDS
The total proceeds of the Issue will be Rs. [●] lakh. After deducting the Issue expenses (including fees and
commissions) of approximately Rs. [●] lakh, the net proceeds of the Issue will be approximately Rs. [●] lakh (the
“Net Proceeds”).
Subject to compliance with applicable laws and regulations, we intend to use the Net Proceeds to meet expenses
and investment pertaining to expansion and diversification of business of our Company.
As permissible under applicable laws, our management will have flexibility in deploying the Net Proceeds
received by our Company from the Issue. Pending utilisation for the purposes described above, our Company
intends to temporarily invest funds in creditworthy instruments, including money market mutual funds and
deposits with banks. Such investments would be in accordance with the investment policies as approved by the
Board of Directors from time to time and applicable laws.
Neither our Promoters nor our Directors are making any contribution either as part of the Issue or separately in
furtherance of the objects of the Issue.
55
CAPITALISATION
The following table sets forth the capitalisation of our Company as at March 31, 2016, derived from the
Company’s audited consolidated financial statements for the Fiscal March 31, 2016, and as adjusted to give effect
to the Issue. This table should be read in conjunction with “Summary Financial Information”, “Risk Factors”,
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Financial
Information” on pages 30, 33, and 84, respectively, of the Preliminary Placement Document.
(Rs. in lakh)
As of
March 31, 2016
As Adjusted for
the Issue*
Short term borrowing (A):
Secured
Unsecured
Long term borrowings including current maturities (B):
Secured#
Unsecured
14,570.49
14,570.49
NIL
3,463.44
3,463.44
NIL
[]
[]
[]
[]
[]
[]
Total borrowing (C)
Shareholders’ funds:
Share capital
Fresh shares pursuant to the Issue
Reserves and surplus
Share premium pursuant to the Issue**
Total shareholder’s funds (D)
18,033.93
[]
966.66
16,654.90
17,621.56
[]
[]
[]
[]
[]
Total capitalisation (C) + (D)
Debt / equity ratio: (Total long term borrowings/total
Shareholders fund (B/D))
Debt / equity ratio: (Total borrowings/total Shareholders’
fund (C/D))
35,655.49
0.20
[]
[]
1.02
[]
Note:
*Share capital, reserves, surplus (adjusted) and post-issue capitalisation can be determined only on the conclusion of the Issue.
** Does not consider the adjustment towards the Issue Expenses.
#
CFS Mexico has availed an amount of USD 5,850,000 from Exim Bank in April 2016 to finance the Dresen Acquisition. For details, see
“Management’s Discussion and Analysis of Financial Condition and Results of Operations on page 84.
56
CAPITAL STRUCTURE
The Equity Share capital of our Company as on date of the Preliminary Placement Document is as follows:
(in Rs., except Equity Share data)
Aggregate
nominal value
Authorised Capital
15,00,00,000 Equity Shares of Re. 1 each
15,00,00,000
Issued, subscribed and fully paid-up share capital prior to the Issue
9,66,65,830 Equity Shares of Re. 1 each
9,66,65,830
Present Issue being offered to the Eligible QIBs through this Preliminary Placement
Document
[●] Equity Shares at a premium of Rs. [●], i.e. at a price per one Equity Share of Rs. [●]
[●]
Paid-up share capital after the Issue
[●] Equity Shares
[●]
Securities premium account
Securities premium account prior to the Issue
1,066.10
Securities premium account after the Issue*
[●]
*
The securities premium account has been calculated on the basis of gross proceeds from the Issue.
(a)
As at March 31, 2016, our Promoter and Promoter Group, held 39.84% of the pre-Issue share capital of
our Company. We presently comply with the provisions relating to minimum public shareholding as
required under the Listing Regulations.
(b)
The Issue has been authorised by the Board on September 25, 2015 and the Shareholders pursuant to a
special resolution dated December 2, 2015.
Share capital history of our Company
The history of the share capital of our Company since incorporation is as follows:
November 12,
1993
3
Face
Value
(Rs.)
100
December 7,
2002
April 26, 2006
June 9, 2006
February 22,
2007
December 21,
2007
October 23,
2009
January 21,
2010
1,000
Date of Issue/
Allotment
Number of
Equity
Shares
Issue Price
(Rs.)
Nature of
Consideration
Reason for Allotment
100
Cash
Subscription to Memorandum
of Association
100
100
Cash
Preferential allotment
10,030
39, 970
48,00,000
10
10
10
10
10
9,50,000
10
52
Cash
Consideration
other than cash
Cash
Sub-division of Equity Shares
Preferential allotment
Allotment of shares pursuant to
a scheme of arrangement
Preferential allotment
6,200
10
50
Cash
5,090
10
50
Cash
Allotment pursuant to ESOP
scheme
Allotment pursuant to ESOP
scheme
March 25, 2010
3,190
10
50
Cash
September 3,
2010
January 13,
2011
August 26, 2011
34,88,208
10
15.75
Cash
3,315
10
50
Cash
17,730
10
50
Cash
57
Allotment pursuant to ESOP
scheme
Rights issue
Allotment pursuant to ESOP
scheme
Allotment pursuant to ESOP
scheme
Date of Issue/
Allotment
December 8,
2011
December 8,
2011
February 6,
2012
March 26, 2012
Number of
Equity
Shares
14,750
Face
Value
(Rs.)
10
3,350
Issue Price
(Rs.)
Nature of
Consideration
50
Cash
10
62
Cash
4,67,09,165
2
-
85,225
2
10
Cash
October 1, 2012
54,525
2
10
Cash
November 26,
2012
November 26,
2012
October 7, 2013
24,000
2
12.40
Cash
71,025
2
10
Cash
1,15,575
2
10
Cash
66,500
2
10
Cash
11,900
2
12.40
Cash
-
January 13,
2014
January 13,
2014
January 13,
2014
April 21, 2014
66,250
2
16
Cash
1,17,875
2
10
Cash
April 21, 2014
11,900
2
12.40
Cash
April 21, 2014
71,000
2
16
Cash
July 2, 2014
93,850
2
10
Cash
July 2, 2014
8,550
2
12.40
Cash
July 2, 2014
91,325
2
16
Cash
August 13, 2014
5,325
2
10
Cash
August 13, 2014
3,775
2
12.40
Cash
August 13, 2014
21,750
2
16
Cash
August 13, 2014
9,52,59,030
1
-
October 9, 2014
1,800
1
6.20
Cash
October 9, 2014
1,22,750
1
8
Cash
63,900
1
5
Cash
45,900
1
6.20
Cash
295,750
1
8
Cash
31,250
1
6.20
Cash
67,750
1
8
Cash
December 4,
2014
December 4,
2014
December 4,
2014
February 26,
2015
February 26,
2015
58
-
Reason for Allotment
Allotment pursuant to ESOP
scheme
Allotment pursuant to ESOP
scheme
Sub-division of Equity Shares
Allotment pursuant to ESOP
scheme
Allotment pursuant to ESOP
scheme
Allotment pursuant to ESOP
scheme
Allotment pursuant to ESOP
scheme
Allotment pursuant to ESOP
scheme
Allotment pursuant to ESOP
scheme
Allotment pursuant to ESOP
scheme
Allotment pursuant to ESOP
scheme
Allotment pursuant to ESOP
scheme
Allotment pursuant to ESOP
scheme
Allotment pursuant to ESOP
scheme
Allotment pursuant to ESOP
scheme
Allotment pursuant to ESOP
scheme
Allotment pursuant to ESOP
scheme
Allotment pursuant to ESOP
scheme
Allotment pursuant to ESOP
scheme
Allotment pursuant to ESOP
scheme
Sub-division of Equity Shares
Allotment pursuant to ESOP
scheme
Allotment pursuant to ESOP
scheme
Allotment pursuant to ESOP
scheme
Allotment pursuant to ESOP
scheme
Allotment pursuant to ESOP
scheme
Allotment pursuant to ESOP
scheme
Allotment pursuant to ESOP
scheme
Date of Issue/
Allotment
October 27,
2015
October 27,
2015
November 24,
2015
February 23,
2016
Number of
Equity
Shares
88,200
Face
Value
(Rs.)
1
20,000
Issue Price
(Rs.)
Nature of
Consideration
6.20
Cash
1
8
Cash
334,000
1
8
Cash
335,500
1
67
Cash
59
Reason for Allotment
Allotment pursuant to ESOP
scheme
Allotment pursuant to ESOP
scheme
Allotment pursuant to ESOP
scheme
Allotment pursuant to ESOP
scheme
DIVIDEND POLICY
The declaration and payment of dividends by our Company is governed by the applicable provisions of the
Companies Act, 2013 and our Memorandum and Articles of Association. Under the Companies Act, 2013, the
board of directors of a company recommends the payment of dividend and the shareholders approve of the same
at a general meeting. The Articles of Association grant discretion to the Board to declare and pay interim dividends
as it may think fit. The Shareholders have the right to decrease but not to increase the dividend amount
recommended by the Board of Directors.
The table below sets forth the details of the dividends declared by our Company on its Equity Shares during the
last three financial years:
Financial Year
ended
March 31, 2016#
March 31, 2015
March 31, 2014
#
*
Dividend
per
Equity
Share
(Rs.)
Amount of dividend
declared exclusive
of tax
(Rs. in lakh)
Dividend tax (Rs.
in lakh)
Total (Rs. in lakh)
Rate of
dividend (in
%)
0.45
0.45
0.70
436.35*
431.50
331.83
89.04
88.35
56.40
525.38
519.85
388.23
45
45
35
Dividend declared by the Board, subject to approval of the Shareholders at the general meeting.
Includes short provision pertaining to Fiscal 2015 amounting to Rs. 1.36 lakh.
The amounts paid as dividends in the past are not necessarily indicative of the dividend policy of our Company
or dividend amounts, if any, in the future. The declaration of dividends are dependent on a number of factors,
including but not limited to the earnings, capital requirements, contractual obligations, applicable legal
restrictions, results of operations, overall financial position of our Company and other factors that may be
considered relevant by the Board. Our Company has no formal dividend policy. There is no guarantee that any
dividends will be declared or paid or that the amount thereof will not be decreased in the future.
Dividends are payable within 30 days from the date of its declaration. Any shareholder who ceases to be a
shareholder prior to the record date or who becomes a shareholder after the record date will not be entitled to the
dividend declared by our Company.
60
INDUSTRY OVERVIEW
The information in this section has been extracted from certain publications prepared by third party sources as
cited in this section. Industry sources and publications generally state that the information contained therein has
been obtained from sources generally believed to be reliable but their accuracy, completeness and underlying
assumptions are not guaranteed and their reliability cannot be assured. While we have exercised reasonable care
in compiling and reproducing such official, industry, market and other data in this document, it has not been
independently verified by us or any of our advisors, or the of the Book Running Lead Manager or any of its
advisors, and should not be relied on as if it had been so verified.
Overview of the Indian Economy
India’s growth rebounded in 2014 and 2015, with both years exceeding 7%. Investors’ perceptions of India
improved in early 2014, due to a reduction of the current account deficit and expectations of post-election
economic reform, resulting in a surge of inbound capital flows and stabilization of the rupee. The outlook for
India's long-term growth is moderately positive due to a young population and corresponding low dependency
ratio, healthy savings and investment rates, and increasing integration into the global economy. (Source: As
available on https://www.cia.gov/library/publications/the-world-factbook/geos/in.html on June 26, 2016). In
India, growth is projected to notch up to 7.5 percent in 2016–17, as forecast in October. Growth will continue to
be driven by private consumption, which has benefited from lower energy prices and higher real incomes. With
the revival of sentiment and pickup in industrial activity, a recovery of private investment is expected to further
strengthen growth. In India, monetary conditions remain consistent with achieving the inflation target of 5 percent
in the first half of 2017, although an unfavourable monsoon and an expected public sector wage increase pose
upside risks. In India, lower commodity prices, a range of supply- side measures, and a relatively tight monetary
stance have resulted in a faster-than-expected fall in inflation, making room for nominal interest rate cuts, but
upside risks to inflation could necessitate a tightening of monetary policy. Fiscal consolidation should continue,
underpinned by revenue reforms and further reductions in subsidies.
(Source: World Economic Outlook, April 2016, as available on
https://www.imf.org/external/pubs/ft/weo/2016/01/pdf/text.pdf on June 26, 2016)
Asian and Pacific Economies - Real GDP, Consumer Prices, Current Account Balance, and Unemployment (Annual
percentages unless mentioned otherwise)
(Source: World Economic Outlook, April 2016, as available on
https://www.imf.org/external/pubs/ft/weo/2016/01/pdf/text.pdf on June 26, 2016)
61
Global Chemical Industry
Global chemical market size was estimated at $3.9 trillion in 2013 and is expected to grow at 5-6% per annum
over the next decade to reach $5.1 trillion by 2018.
Chemical industry is a knowledge as well as capital intensive industry. It plays a significant role in the global
economic and social development. It is also a human resource intensive industry and hence employs a large
number of people. Globally, more than 20 million people are expected to be employed in this industry. The
diversification within the chemical industry is large and covers more than eighty thousand commercial products.
(Source: “Handbook on Indian Chemicals and Petrochemicals Sector, October 2014” published by FICCI as
available on http://ficci.in/spdocument/20441/Knowledge-Paper-chem.pdf on June 26, 2016)
Chemical Industry in India
The Indian chemical market is estimated at USD 139 billion in 2014 and is expected to grow at ~9% per annum
over the next five years. India stands at 12th worldwide in terms of volume contribution towards Global chemical
industry. Gujarat, Maharashtra and Tamil Nadu are leading the charge being the major chemical manufacturers in
the country. The key driver being the significant coastlines the states are endowed with. The country's chemical
industry has the potential to reach USD 214 billion by FY19 growing at a CAGR of ~9%. The growth is expected
to be driven by rising demand in end-use segments and expanding exports fuelled by increasing export
competitiveness. The success, however, will depend on how well it's key challenges are addressed such as high
dependence on imports, small installed capacities, low focus on technology upgradation and the availability of
vocationally trained manpower. Looking particularly towards the Indian chemical industry, it stands out to be the
3rd largest producer in Asia. The chemical industry in India has started to evolve rapidly since the last five years.
Despite its large size and significant GDP contribution, the industry accounted for ~3.4% of the global chemicals
industry (~USD 4 Trillion). (Source: “A Report on Chemical Industry” published by FICCI as available on
http://ficci.in/spdocument/20658/knowledge-paper-chem2.pdf on June 26, 2016)
Chemical industry is broadly classified as the following sub groups:
1.
Bulk Chemicals: It includes basic organic chemicals (methanol, acetic acid etc.) and basic inorganic
chemicals (caustic soda, chlor alkali etc.).
2.
Specialty Chemicals: Specialty Chemicals, also known as performance chemicals, are low-volume but highvalue compounds. These chemicals are derived from basic chemicals and are sold on the basis of their
function. Paint, adhesives, electronic chemicals, oilfield chemicals are some examples of specialty chemicals.
3.
Agro Chemicals: Chemicals essentially meant for protecting agriculture crops against insecticides and
pesticides are covered under this sub-group
62
4.
Petrochemicals: Petrochemicals are chemical products derived from petroleum. The two most common
petrochemical classes are olefins (including ethylene and propylene) and aromatics (including benzene,
toluene and xylene isomers)
5.
Fertilizers: Fertilizer is any organic or inorganic substance which supplies chemical elements required for
plant growth. Fertilizer sector manufactures critical raw materials for agriculture which is a major occupation
of the country.
(Source: “Handbook on Indian Chemicals and Petrochemicals Sector, October 2014” published by FICCI as
available on http://ficci.in/spdocument/20441/Knowledge-Paper-chem.pdf on June 26, 2016)
Global Speciality Chemical Market
Speciality chemicals are a unique group of high value and low volume products known for their end usages and/or
performance enhancing properties. Speciality chemicals are a largely fragmented segment in chemical industry.
It encompasses products from paints, coatings and plastics to home care surfactants, flavours and fragrances.
Being so “usage-specific”, speciality chemicals touches upon every segment of population these days. (Source:
“A
Report
on
Chemical
Industry”
published
by
FICCI
as
available
on
http://ficci.in/spdocument/20658/knowledge-paper-chem2.pdf on June 26, 2016)
The Global Specialty Chemicals market is valued at US$649.5 billion in 2015 and is expected to reach US$851.2
billion by 2020, growing at a CAGR of 5.56 percent. The market is divided into several segments, and the growth
and decline of each component influence the growth of this market. (Source: TechNavio Report)
(Source: TechNavio Report)
The economic growth in emerging markets of the APAC region has led to an increase in demand for specialty
chemicals across all product categories. Greater industrial productivity has resulted in an increase in demand for
chemicals in the region. Moreover, because of the continued economic growth in the area, the demand for products
that cannot be supplied locally has increased. Again, specialty chemical manufacturers in the mature markets of
Western Europe and the US are looking at the APAC region for growth and expansion opportunities. However,
the APAC region consist of markets with varying levels of maturity and manufacturers are encountering problems
such as high market entry costs, and lack of infrastructure and local expertise to distribute and sell their products.
Thus, the manufacturers are adopting several measures to penetrate the markets in the APAC region by reducing
business complexity and production costs. Many specialty chemical distributors are helping the vendors to sell
their products to customers and set up sales and distribution channels. Further, the fast-growing economies in the
APAC region offer opportunities for the specialty chemical manufacturers to provide a range of products, and
value-added services, to meet the growing demands. (Source: TechNavio Report)
The high growth rates observed in segments such as Electronic Chemicals and Materials, Specialty Fuel Additives,
Mining Chemicals, Surfactants, and Engineering Plastics, will drive the market during the forecast period.
Antioxidants form an integral part of Fuel Additives, Plastic Additives, and Food Additives. The majority of the
demand for specialty chemicals is expected to emerge from developing countries such as India, China, and Brazil.
Increasing mining and manufacturing activities, and the growth in electronics and automobile production,
63
particularly in China and other developing nations in the APAC region, is expected further to boost the growth of
the Global Specialty Chemicals market. Indian market is majorly driven by domestic consumption, which is rising;
and with the recent “Make in India” initiative taken by the present Government of India, the market is expected
to gain real momentum. Higher FDI is projected to come in next five years to this sector in India. (Source:
TechNavio Report)
Indian Specialty Chemicals Market
(Source: “A Report on Chemical Industry” published by FICCI as available on
http://ficci.in/spdocument/20658/knowledge-paper-chem2.pdf on June 26, 2016)
The Indian Speciality Chemical market is valued at 25.3 billion USD as of FY14. The growth potential of
consumption of speciality chemicals is strong and is expected to reach 44 billion USD by FY19. Currently, the
penetration of speciality chemicals within India's end markets is low. With an increased focus on improving
products, usage intensity of speciality chemicals within these end markets will rise in India over the next decade.
Key Trends
 Focus on R&D: Spending on innovation has escalated. This is basically because of the increased sales in the
automotive and consumer electronics segments. Recently, the focus has been shifting towards the R&D
sector. National research institutes like NCL and private sector companies are concentrating on developing
speciality chemicals and polymeric additives for specific end user segments like automobile, textiles, etc
 Green Transformation: A cohesive approach across the value chain including procurement, product
development, manufacturing process and marketing along with adequate risk management and reporting at
each step is becoming critical. Companies establishing “Sustainable Leadership” among all other stakeholders
would have a distinct edge over others
Antioxidant Market
(Source: The below information has been obtained from the TechNavio Report)
Antioxidants are molecules that inhibit oxidation of other molecules. They neutralize the effects of free radicals
in the human body and prevent the body from the chain of oxidation reaction by becoming oxidized themselves.
There are two types of antioxidant: natural antioxidants, and synthetic antioxidants. Antioxidants find application
across various industries, including Rubber, Plastics, Food and Feed, Petroleum Fuels, etc. The various types of
antioxidant include vitamin E, vitamin C, BHT, BHA, propyl gallate, etc.
The Global Antioxidants market is expected to grow at a CAGR of 4.7 percent during the forecast period of 20142018. In 2013, the market was dominated by the APAC region, followed by the Americas and the EMEA region.
There is a vast opportunity for antioxidant vendors to increase their dominance in the market by developing natural
antioxidants.
The growth of the Global Antioxidants market is driven by several factors. One of the key drivers contributing to
the growth of this market is the growing awareness about health in people. This is mainly attributed to consumers
adopting a healthy lifestyle in order to prevent diseases. The increasingly aging world population and rising
demand for antioxidants from emerging markets are also expected to propel the usage and demand for antioxidants
during the forecast period.
64
Antioxidants are compounds that inhibit chemical reactions with oxygen, which prevents cell damage in humans
and other animals, as well as degradation of fatty foods, resulting in undesirable color changes or perishing.
Natural antioxidants are substances or nutrients found in food, which can prevent or slow the oxidation process
within the body that damages cells. Naturally occurring antioxidants include retinoids (vitamin A), bioflavonoids
(citrin), tocopherols (vitamin E), ascorbic acid (vitamin C), beta carotene, phytochemicals, glutathione,
peroxidase, cysteine, flavonoids, and selenium. Fruits and vegetables are the top sources of natural antioxidants.
Synthetic antioxidants are chemical compounds that eliminate the undesirable effects of reactive oxygen in food
and neutralize free radicals. Synthetic antioxidants include butylated hydroxytoluene (BHT), butylated
hydroxyanisole (BHA), and propyl gallate. Synthetic antioxidants are widely used in food packaging, animal feed,
rubber, cosmetics and petroleum products. In food packaging and animal feed it acts as a preservative and
increases the shelf life of products.
The Global Antioxidants market was valued at US$3.18 billion in 2013 and is expected to reach US$4 billion by
2018, growing at a CAGR of 4.7 percent.
The market is expected to witness steady growth during the forecast period, some of the major reasons for which
are the increased customer awareness about the health benefits of antioxidants and the increasing health and
wellness concerns among individuals. The increasing demand for antioxidants from developed and developing
countries is also contributing to the growth of the Global Antioxidants market. The increased application of
antioxidants in food products, cosmetics, and synthetic resins is also boosting the demand for antioxidants in the
global market. The increasing aging of the global population and the growth in health consciousness are causing
increased adoption of antioxidants in diets and as supplements. While the growth of antioxidants is evident due to
their incomparable benefits, there are some factors that further drive their growth; these include increasing
population, rising demand for fast moving consumer groups, and cosmetics.
65
Global Antioxidants Market by Application - 2013
Food and Beverage industry
Antioxidants are used in the Food and Beverage industry to limit product spoilage and extend the shelf life of
products. Antioxidants find their application in the Food and Beverage industry for preserving food materials from
the oxidation process and preserving fats, flavors, and nutrients. Antioxidants preserve freshness, flavor, and
nutrients and also lengthen the shelf life of the product. The demand for antioxidants in the Food and Beverage
industry is rising as a result of the increase in demand for processed foods in developing countries. Increased
health consciousness among people and the addition of food and beverages with high antioxidant ingredients in
diets is also driving demand. The Global Antioxidants market for Food and Beverages industry was valued at
US$450.00 million in 2013 and is expected to reach US$532.08 million by 2018, growing at a CAGR of 3.41
percent.
66
Animal feed industry
Antioxidants are used in animal feed to prevent undesirable oxidation, which could result in lower feed
consumption and nutrient deficiencies in feed. Therefore, antioxidants are added to ensure that animals remain
healthy and increase the shelf life of feed. The market is expected to witness steady growth during the forecast
period, some of the major reasons for which are technological advancements, the increase in global meat
consumption, and the increasing health and wellness concerns among individuals. Further, the growing global
population has increased the demand for meat with a longer shelf life. Hence, the demand for new and innovative
animal feed antioxidants from companies selling packaged and frozen meat is increasing, primarily to preserve
and improve the quality of animal feed. The Global Animal Feed Antioxidants market for the Animal Feed
industry was valued at US$177 million in 2013 and is expected to reach US$226.97 million by 2018, growing at
a CAGR of 5.10 percent.
67
Global Antioxidants Market by Geographical Segmentation
The APAC region dominated the Global Antioxidants market in 2013, accounting for a share of 41-44 percent of
the total volume consumption. China is the major consumer in the APAC region due to the large size of the
domestic market. Further, the increasing demand from other Asian countries, such as India and Japan, is driving
the market in this region. The Americas followed the APAC region, accounting for a share of 33-37 percent in
2013. In this region, the North American region is the major consumer of antioxidants. The EMEA region
accounted for 26-30 percent of the market in 2013. The major consumers in the market in the EMEA region are
the countries in Western Europe.
Consumption of Antioxidants by Volume 2013
Hydroquinone and Pyrocatechol Market
Hydroquinone, also known as benzene-1, 4-diol or quinol is an aromatic organic compound and has the chemical
formula C6H4 (OH) 2. Hydroquinone is available in a white granular form. Industrial production of hydroquinone
occurs through two methods. The first is the dialkylation of benzene with propene to give 1, 4-diisopropylbenzene.
This compound creates the bis (hydroperoxide) through a reaction with air. It then rearranges and provides
hydroquinone and acetone in acid. It is also produced through hydroxylation of phenol. (Source: TechNavio
Report)
Global hydroquinone demand was broadly restructured over the last decade with the part used in photography
declining to nearly 5% of total demand in 2014 against almost 30% of that demand in 2001. HQ usage for the
manufacture of rubber chemicals also suffered from more competitive sources of 6PPD by far the main
antioxonant in the tire market segment. HQ usage as a process antioxidant in the manufacture of some large
volume monomers and its additional usage (as MEHQ) as a stabilizer of numerous other commodity and specialty
monomers emerged as the main outlet for hydroquinone with a global demand expected to increase from nearly
28.5% of total consumption in 2010 to 37% of 2014 demand. The manufacture of other antioxidants such as
TBHQ and BHA should add to this strength with the increased usage of these additives in foods, feeds and other
specialty usages allowing this market segment to continue growing at about 3.7% per year. (Source: Hydroquinone
and Pyrocatechol, World Markets & Prospects, 2014-2019 by Rabih SROUR)
Hydroquinone supply was dramatically affected during 2010 by troubles at Mitsui’s Chiba operation and
Borregaard’s shut down at the end of June 2010 given the imbalance in catechol and hydroquinone market
demand. This resulted in a market tightness that was exacerbated by the recovery in most market segments but in
the same time affected by higher prices for raw materials benzene and phenol. By year end 2010, feedstocks
availability issues and higher raw material prices pushed HQ prices to record levels with some customers having
to pay in excess of 8000 $/ton to receive few containers whereas some large consumers could still be charged
between 5500 and 6500 $/ton. Since that time, production continued to expand in particular in China helped by a
strong local growth that benefited primarily from the continued growth in acrylic acid production in China in
particular but also in most other Asian countries. (Source: Hydroquinone and Pyrocatechol, World Markets &
Prospects, 2014-2019 by Rabih SROUR)
68
HQ usage as an antioxidant in the manufacture of such large volume monomers like acrylic acid and MMA
together with the need of both HQ and PMP as stabilizers for many mono and polyfunctional acrylates and
methacrylates is now by far the most important outlet for this intermediate representing alone nearly 49.3% of
global HQ consumption in 2014 and these two segments should see their share progressing to almost 52% of
anticipated global demand by 2019. (Source: Hydroquinone and Pyrocatechol, World Markets & Prospects, 20142019 by Rabih SROUR)
Regional hydroquinone demand also shows that W.Europe maintain a strong demand for this intermediate despite
losing the production of BHA and TBHQ to Indian manufacturers but also helped by Rhodia’s competitiveness
in operating its French plant with a good benefit from its historical access to cheaper raw material phenol and
hydrogen peroxide. (Source: Hydroquinone and Pyrocatechol, World Markets & Prospects, 2014-2019 by Rabih
SROUR)
Usage as an antioxidant in acrylate and methacrylate monomers both as such and as the methyl ether which inhibit
their polymerization during storage and transportation remains another fast growing outlet which will continue to
allow HQ demand increasing at a faster rate than GDP growth in major industrial regions. (Source: Hydroquinone
and Pyrocatechol, World Markets & Prospects, 2014-2019 by Rabih SROUR)
Catechol is also known as pyrocatechol or 1, 2-dihydroxybenzene. The chemical formula is C6H4 (OH) 2.
Catechol is available as feathery white crystals and is readily soluble in water. It has a slight odor of phenol.
Industrially catechol is produced from the hydroxylation of phenol using hydrogen peroxide. It is also prepared
by the hydrolysis of 2-substituted phenols with hot aqueous solutions which contain alkali metal hydroxides.
Catechol occurs in trace amounts naturally in fruits and vegetables along with the enzyme polyphenol oxidase. It
is found in argan oil. Pyrocatechol occurs in Agaricus bisporus. It is also found in castoreum, a substance from
castors which has application in perfumery. (Source: TechNavio Report)
Pyrocatechol, also called catechol, is a raw material to numerous pesticides, pharmaceuticals and few synthetic
flacours. World catechol demand is projected to increase to nearly 51759 tons by 2019 therefore exhibiting an
annual growth rate of about 3.02% with nearly half of this demand coming from guaiacol that is needed for the
large production of synthetic vanillin while a few other pharmaceuticals continue to benefit from their growing
usage in developing countries. Guethol production that is needed for ethyl vanillin synthesis adds another 12.5%
of total consumption. (Source: Hydroquinone and Pyrocatechol, World Markets & Prospects, 2014-2019 by
Rabih SROUR)
Catechol should also benefit from growing consumption of TBC as a polymerisation inhibitor in butadiene and
styrene operations which are continuing to follow the stronger growth in Asian countries’ synthetic rubber
markets. (Source: Hydroquinone and Pyrocatechol, World Markets & Prospects, 2014-2019 by Rabih SROUR)
Hydroquinone demand is projected to increase at an average annual rate of about 3.7% for the 2015-2019 period.
HQ demand is thus expected to increase to about 72,000 tons by 2019, a level which existing capacities can only
cope with by operating at over 90% of capacity which is obviously difficult to achieve given pressure from
catechol demand and the regular maintenance needed for every facility. (Source: Hydroquinone and Pyrocatechol,
World Markets & Prospects, 2014-2019 by Rabih SROUR)
Vanillin Market
(Source: The below information has been obtained from the TechNavio Report)
Globally the Vanillin market, on the whole, has been valued at US$ 642.33 million in 2014 and is expected to
grow at a CAGR of 5.54 percent to reach US$ 885.09 million by 2020.
69
Global Synthetic Vanillin market has been valued at US$ 333.75 million in 2015 and would grow at a CAGR of
6.72 percent to reach US$ 462 million by 2020. The demand for synthetic Vanillin is increasing as the cost of
Natural Vanilla is rising at an astronomical rate.
Major Application of Vanillin
Synthetic vanillin is popularly and extensively used as a flavoring agent in various baked goods such as cakes, ice
creams, chocolates, and beverages. Vanillin is widely used in food applications. 97 percent of flavors and
fragrances used in food are from synthetic vanilla. The bakery industry is on a high growth trajectory globally.
Methyl vanillin is used mostly for flavoring foods and ethyl vanillin which is stronger is used in ice creams,
beverages, and chocolates. Flavoring agents have high demand in the bakery and confectionery industry. Vanilla
has high usage in the dairy industry as vanilla flavored milk products such as flavored milk has high demand.
Vanilla ice creams are extremely popular, and even beverage giants such Coca-cola and Pepsi have introduced
vanilla flavors.
The fragrance and personal care industry are the second largest user of synthetic vanilla. Francois Coty is a favorite
fragrance brand which is well known for its usage of vanilla fragrance ever since 1927 in their L’Aimant (perfume).
Almost 23 percent of all high-quality fragrances use vanilla.
The application for vanillin product is growing in the emerging APAC countries of India, China, Thailand,
Indonesia, Malaysia and Indonesia. The confectionery and the bakery industry are the primary consumers of
synthetic vanillin from these countries.
Vanilla is known to have anti-mutagenic, anti-microbial, anti-oxidant and anti-sickle cell effect. These
characteristics are the reason for its pharmaceutical use.
70
BUSINESS
Overview
We are a vertically integrated company, engaged in research, development, manufacturing, commercialising, and
marketing of speciality chemicals and blends which are used in a wide array of food, feed, animal and pet nutrition
and industrial products. We categorise our business into four different verticals based on our product portfolio,
namely: (i) Diphenols; (ii) Shelf-life Extension Solutions; (iii) Performance Chemicals, and (iv) Aroma. We have
recently added animal nutrition to our portfolio of products pursuant to our recent Dresen Acquisition and going
forward we expect this to complement our Shelf-life Extension Solutions portfolio. We market our products
globally including in Europe, Asia Pacific, India, South and Central America and North America.
The key raw material used for manufacturing a large part of our products is Hydroquinone and Catechol. Our
Company manufactures both these products as a part of our Diphenols business. While we use a large part of the
Diphenols we produce internally, we also sell Diphenols to external customers. Our Shelf-life Extension Solutions
include a range of antioxidant solutions used to increase the shelf life of oils and fats, which in turn is used in
processed food products like bakery, animal feed, pet food, confectionery, fried snack foods and dairy. We also
manufacture antioxidant blends (“Blending Business”), which we market under brands Xtendra and NaSure. Our
Performance Chemicals vertical includes production of amongst others, Guaiacol, Veratrole, TBC and MEHQ,
which are derivatives of either Catechol or Hydroquinone and have wide application in sectors such as food
flavouring, pharmaceuticals intermediate, agrochemicals, dyes and pigments and fragrance industry. Our Aroma
vertical primarily includes production of Vanillin and Ethyl Vanillin (“Vanillin Products”) which are marketed
under the brands Vanesse and Evanil. The key raw materials used to manufacture our Vanillin Products are
Guaiacol and Guethol, respectively, which in turn are derived from Catechol. Our Vanillin Products are used to
give food and beverages a flavour of vanilla, to enhance other flavours or to mask unwanted flavours and are used
in food, flavour and fragrance, incense sticks, pharma and cattle feed segments. We have recently acquired a 65%
shareholding in Dresen Mexico. Dresen manufactures and markets a range of animal nutrition products,
antioxidants, adsorbents, acidifying agents, bactericides, binders and mould inhibitors.
Our manufacturing facility in Italy provides captive requirements of key raw materials Hydroquinone and
Catechol, making most of our business segments vertically integrated. While we consume a large part of this
internally for our manufacturing processes in India, we also buy and sell the Diphenols in global markets,
depending on market conditions, our internal requirements and prices in global markets and in India. The proposed
new manufacturing facility at Dahej, SEZ, upon commissioning would significantly increase our capacities to
produce Diphenols and will also enable us to optimise logistics and inventory costs through establishing an
alternate source of Diphenols in India. We believe that this new manufacturing facility at Dahej will fulfil our
internal requirement of Diphenols thereby protecting us from relying on imports for our raw key materials. This
also reduces the risk of unfavourable terms of supply such as high pricing and long timeline for delivery. Our
Shelf-life Extension Solution products are manufactured in our Tarapur manufacturing facility in India. Our
Blending Business is conducted in our blending facilities Tarapur, India, Indaiatuba, Brazil and Mexico City,
Mexico. We also have a contractual arrangement in Iowa, USA for outsourcing our Blending Business to a third
party blending unit. In respect of our Performance Chemicals business, various derivatives of Diphenols are
manufactured at our facilities in Tarapur, India and shall also be manufactured in the proposed new manufacturing
facility at Dahej, SEZ, once commissioned. Derivatives of Diphenol are also manufactured at third party
manufacturing facilities in Khopoli and Mahad, Maharashtra on contractual basis. Our Vanillin Products are
currently manufactured at our own facility in Tarapur, India and at a third party manufacturing in Yuyao Zhejiang,
China, on contractual basis. Going forward, Vanillin Products will also be manufactured at the proposed new
manufacturing facility at Dahej, SEZ. Guaiacol and Guethol, which are derived from Catechol and are raw
material required for Vanillin Products, are manufactured in Tarapur, India and Mahad, India. Dresen has a
blending and manufacturing facility in Mexico which is used to manufacture animal nutrition products,
antioxidants, adsorbents, acidifying agents, bactericides, binders and mould inhibitors.
.
We are focused on R&D and innovation and have R&D units in Tarapur, India and in Ravenna, Italy. Our R&D
units are focused on developing chemical compounds, new manufacturing processes and improving existing
processes and new chemistry with a focus on developing new derivatives of Diphenols or improving the
commercial viability thereof. We also have a pilot plant in Tarapur, India. New processes which are developed in
our R&D units are implemented in small scale in our pilot plant to understand the efficacy and challenges before
commercially manufacturing such products. Our R&D units have advanced technological equipment to develop,
test and evaluate our products. Our Company also has application laboratories (“Application Labs”) in Mumbai,
USA, Mexico and Brazil. Application Labs are primarily involved with customising blends for various
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applications across our Shelf-life Extension Solutions. Application Labs also provide technical assistance and
development support to customers, test the efficacy of various products that are produced by our customers and
conduct stability studies for determining the shelf life of various products. We have a dedicated R&D team
comprising of  employees.
We have a wide sales and marketing network, spread across the globe. We have our own sales and marketing team
in various jurisdictions including India, China, Netherlands, Italy, Brazil, Peru, Columbia, Guatemala, United
Kingdom, Denmark, Mexico, Cuba and USA, headed by experienced professionals. Our established sales and
marketing department has separate teams focusing on each of our business verticals. In certain jurisdictions such
as Indonesia, Middle East and in certain parts of India, we market and sell our products through third parties, with
whom we have sales and distribution arrangements. We have a team of 58 employees in our sales and marketing
team across the globe.
Our gross revenue from operations for the financial year Fiscal 2016 stood at Rs. 50,422.83 lakh as against
Rs.57,057.68 lakh in Fiscal 2015 and Rs.51,716.91 lakh in Fiscal 2014 (on a consolidated basis). Our EBITDA
for Fiscal 2016, 2015 and 2014 was Rs.9,606.34 lakh, Rs. 9,254.91 lakh and Rs.7,130.88 lakh, respectively and
our profit for the year was Rs. 3,582.37 lakh, Rs.5,502.73 lakh and Rs.2,871.30 lakh, respectively.
Strengths
We believe that the following are our competitive strengths:
1) Vertical integration across value chain
We are a vertically integrated company. Diphenols are the key raw materials for all our business segments. Our
manufacturing facility in Italy provides captive requirements of key raw materials Hydroquinone and Catechol,
making most of our business segments vertically integrated. Our Company is also in process of setting up of a
manufacturing facility in Dahej, SEZ, India which will manufacture Hydroquinone and Catechol. The
commissioning of a new manufacturing facility at Dahej, SEZ, would significantly increase our capacities to
produce our Diphenol products and will also enable us to optimise logistics and inventory costs through the
establishment of an alternate source of Diphenols in India. We believe that this facility will enable us to meet our
internal requirement of Diphenols for the next few years. Further, as a result of our vertical integration, we are
able to provide to our customers traceability of the various raw materials used to develop our product.
It is our endeavour to develop new value added products especially new derivatives of Diphenols, identify new
applications, and look for opportunities to vertically integrate them. Consistent and steady availability of key raw
materials at reasonable cost has lead to efficiency and effectiveness in terms of both resources and operations. Our
vertical integration model of business helps us reduce cost and thereby increase profit margin and timely delivery
of raw materials of desired quality and quantity. It further protects us from relying on external sources for our raw
materials, thereby reducing risk of unfavourable terms of supply such as high pricing and long timeline for
delivery.
2) Global outreach and diversified customer base
We are present in various geographic locations. We have manufacturing and blending facilities in India, Brazil,
Italy and Mexico. We also have a contractual arrangement in USA for outsourcing our Blending Business to a
third party blending unit. Further, our Vanillin Products are currently manufactured at our Tarapur, India facility
and at a third party manufacturing facility in Yuyao Zhejiang, China. We are in the process of setting up a new
manufacturing facility in Dahej, SEZ. Our wholly owned subsidiary, CFS Mexico has recently acquired 65%
shareholding in Dresen Mexico. Dresen is engaged in manufacturing, blending and distribution of speciality
chemicals used for animal nutrition products, antioxidants, adsorbents, acidifying agents, bactericides, binders
and mould inhibitors. The Dresen Acquisition will further help us expand our product portfolio into animal
nutrition and diversify our customer base.
We market our products in Europe, Asia Pacific, India, South and Central America and North America. Our Shelflife Extension Solutions business has customers primarily from Europe, North America, South America and Asia.
Our primary customers for Aroma and Performance Chemicals businesses are from Europe, Asia and South
America. We believe that the Dresen Acquisition will enable us to further penetrate the markets of Mexico, Central
America and parts of South America as well as expand our existing products into these geographies.
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We have a wide sales and marketing network, spread across the globe. We have our own sales and marketing team
in various jurisdictions including India, China, Netherlands, Italy, Brazil, Peru, Columbia, Guatemala, United
Kingdom, Denmark, Mexico, Cuba and USA, headed by experienced professionals. Our established sales and
marketing department has separate teams focusing on each of our business verticals. In certain jurisdictions such
as Indonesia, Middle East and in certain parts of India, we market and sale our products through third parties, with
whom we have sales and distribution arrangements. We have team of 58 employees in our sales and marketing
team across the globe.
We believe that our global outreach and wide customer base sets us apart from other players and enables us to
compete effectively with global players in our industry.
3) Strong R&D capabilities and multiple Application Laboratories
We believe in innovation and our Company has a focused R&D unit. Our R&D leads to benefits such as product
development, product improvement, cost reduction, developing new technologies and innovations that help
improve the commercial viability of various products in our segments. Our R&D units are focused at development
of chemical compounds, developing new processes and improvement of existing processes and new chemistry
with a special focus on developing commercially viable derivatives of Diphenols. Our R&D capabilities have
been instrumental in developing our products. We have R&D units in Tarapur, India and in Ravenna, Italy. We
also have a pilot plant in Tarapur, India. New processes which are developed in our R&D units are implemented
in small scale in our pilot plant to understand the efficacy and challenges before commercially manufacturing
such products.
Our R&D units have advanced technological equipment to develop, test and evaluate our products. Most of our
products have been developed in-house by our R&D units. Our focus on research and development has been
instrumental in enabling the number of products we have introduced over the years, which we believe improves
the performance of our business. Further, our R&D units are continuously working to create value added products
from wastes and by-products of our primary products.
Our research and development facility at Tarapur and Application Lab at Mumbai has been recognised by the
Government of India’s Department of Scientific and Industrial Research as an in-house research and development
unit. We have a strong and dedicated research team of  employees in our various R&D facilities and Application
Laboratories. We believe that with our strong research, development and creative capabilities, we will be able to
further expand our product offerings and improve our product quality. We further believe that with our continuous
focus on process improvements we will be able to achieve improved efficiencies in our production process. We
believe that our focus on innovation facilitates the growth of our customer base as well as our customers’ market
share in their respective product categories.
Our Company also has Application Labs in Mumbai, USA, Mexico and Brazil. Application Labs are primarily
involved with customising blends for various applications across our Shelf-life Extension Solutions. Application
Labs also provide technical assistance and development support to our customers, test the efficacy of various
products that are produced by our customers on defined parameters relevant to our products and conduct studies
to determine the shelf life of various products.
4) Strong financials and cash flows
Our Company has witnessed significant growth in EBITDA and improvement in EBITDA margins over the past
years. Our Total Income for the Fiscal 2016 stood at Rs. 49,361.11 lakh as against Rs. 56,665.08 lakh in Fiscal
2015 and Rs. 51,833.46 lakh in Fiscal 2014. Our EBITDA for Fiscal 2016, 2015 and 2014 was Rs.9,606.34 lakh,
9,254.91 lakh and 7,130.88 lakh, respectively and our profit for the year was at Rs. 3,582.37 lakh, Rs. 5,502.73
lakh and Rs.2,871.30 lakh, respectively. Our EBITDA margins for Fiscal 2016, 2015 and 2014 were 19.05%,
16.22% and 13.79% respectively.
We have a proven track record of operations of a decade and have a strong balance sheet as well as a stable cash
flow profile. We have had positive cash flows on a consolidated basis from operation in each of the last 3 fiscal
years. We believe that our strong and consistent financial performance is an indication of our Company’s strength
which enables us to expand our business further and provide tangible value to our shareholders.
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5) Experienced promoters and management team
We are led by a dedicated senior management team with several years of industry experience. Our Promoters have
played a key role in developing our business and we benefit from their significant experience in the industry we
operate in. We also have a qualified senior management team with experience in the domestic and international
shelf life extension, performance chemical and aroma industry. Our Promoters and senior management team have
been instrumental in our successful implementation of various process improvements, successful integration of
our acquisition in Ravenna Italy, expansion of our geographical reach and the growth in our operations over the
last decade.
We believe that our domain knowledge and experience of our Promoters and our management team provides us
with a significant competitive advantage as we seek to grow in our existing markets and enter new geographies.
We believe our senior management team is able to leverage our market position and their collective experience
and knowledge in the speciality chemicals industry, to execute our business strategies and drive our future growth.
In addition, we have an experienced and qualified team of employees. Our personnel policies are also aimed
towards recruiting qualified and talented individuals, facilitating their integration into our Company, providing a
conducive work environment, and promoting the development of their skills, including through in-house and
external training programmes.
Our Strategies
Our key strategies are as follows:
1) Grow our Vanillin business
We, through our existing contract manufacturing arrangements, manufacture Vanillin and Ethyl Vanillin which
are used as compounds in flavours and fragrances, food, incense sticks, pharmaceutical products, cattle feed and
laboratory chemicals. The basic raw material for our Vanillin and Ethyl Vanillin compound are Guaiacol and
Guethol, respectively, which are produced from the raw material Catechol. Certain publicly available information
state that there have been health hazards and regulatory scrutiny of Vanillin produced from certain raw materials
other than Catechol. This has resulted in higher demand for Vanillin derived from Catechol. As per our
understanding of Catechol industry, we believe that Catechol as a raw material is manufactured by only a few
players. Since we manufacture Catechol at our manufacturing facilities, this provides us with a significant
competitive advantage. Globally the Vanillin market, on the whole, has been valued at USD 642.33 million in
2014 and is expected to grow at a CAGR of 5.54 percent to reach USD 885.09 million by 2020. (Source:
TechNavio Report). This represents a huge opportunity for future growth. Going forward, we intend to increase
our Vanillin and Ethyl Vanillin production to capitalise on the demand for this product and market the same by
leveraging on our global reach.
Our Vanillin Products are currently manufactured at our manufacturing facility in Tarapur, India and at a third
party manufacturing facility in Yuyao Zhejiang, China. Vanillin Products are manufactured using Guaiacol and
Guethol which are derivatives of Catechol produced at our manufacturing facility in Italy. In order to achieve the
abovementioned objective of growing our Vanillin business, we have set up a plant at our Tarapur facility to
manufacture Ethly Vanillin and we are currently in the process of setting up a plant in Dahej to manufacture
Vanillin. Once the Dahej project is commissioned, we will have a Vanillin production capacity of 6,000 MTPA
(estimated). This would enable us to reduce our dependence on third parties for manufacturing our Vanillin
Products, thereby significantly increasing our revenues from sale of Vanillin and Ethyl Vanillin.
2) Increase revenue contribution from Performance Chemicals business
Increase in sales of our Performance Chemicals in Fiscal 2016 was primarily driven through sales from Guaiacol,
Veratrole, TBC and MEHQ which are derivatives of Diphenols. We also intend to better leverage our distribution
hubs and maintain stocks locally for supply in key markets such as North America, Asia and South America to
increase our customer base and reduce our transportation cost and time. We continuously strive to introduce new
products in our performance chemical segment through our in-house research and development activities.
In addition to the above, our specific strategies for increasing sales from our key performance chemical products
are as follows:

Guaiacol: Currently, a portion of our production capacity of Guaiacol is produced through contract
manufacturing. Once the new manufacturing facility in Dahej, SEZ, is commissioned, we believe our own
production capabilities of Guaiacol would increase substantially. We intend to use the Guaiacol manufactured
by us to produce Vanillin and to also sell Vanillin as well as Guaiacol in Indian and overseas markets;
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
MEHQ: Manufacturing of MEHQ has started at our Tarapur plant at the end of the second quarter of 2015.
Going forward, we intend to increase our capacity at our Tarapur facility and expand our market reach;

TBC: This is an important polymerization inhibitor for the petrochemicals industry. We currently manufacture
TBC at Khopoli through an outsourcing arrangement we intend to increase this capacity. We also intend to
continue to sell this product to our customers in Europe, South America, China, Middle East, Japan, Korea
and South East Asia. Going forward, we are also considering setting up a warehouse in the United States to
address the local market with reduced supply time;

Veratrole: This product is an important intermediate for the pharmaceutical and agrochemical industry. We
intend to increase our market share for this product and become a preferred supplier for this product.
Our Company through its continuous R&D activities is at advanced stages of commercialising certain other
derivatives of Diphenols, which will enable us to increase revenue from Performance Chemicals vertical.
3) Focus on antioxidant blends for food, feed, pet food and animal nutrition
As the food, feed and pet food industry evolves, there is a strong demand for additives which help increase the
shelf life of these products. We believe that, being one of the leading manufacturers of food grade antioxidants,
TBHQ and BHA enables us to capitalise on the demand of this industry. We are leveraging our capabilities of
manufacturing bulk antioxidants by blending these anti-oxidants with other products to provide customised
solutions to increase the shelf life of oils and fats, which in turn are used in processed food products like bakery,
animal feed, pet food, confectionery, fried snack foods and dairy. Further, due to our vertically integrated
manufacturing processes, our customers will be able to trace our blends from raw material stage to the finished
product stage which is a very critical aspect to ensure food safety. We are also currently developing natural shelf
life extension products, some of which are already commercialised and sold under our brand NaSure. Pursuant to
the Dresen Acquisition, our business has expanded to the animal nutrition segment and provided us access to the
markets of Mexico, Central America and parts of South America. In addition to our current liquid blending facility
at Brazil, we are setting up a dry blending facility in Brazil, which will further help to leverage our products from
Dresen. We also propose to set up of a dry blending facility in Ravenna, Italy to address the demand in the
European market.
We also intend to continue to develop new products and undertake studies for our customers through our various
Application Labs situated at Mumbai, USA, Mexico and Brazil. Our Application Labs has a team of food
technologists having testing and developmental capabilities in bakery, confectionery, fried snacks, fats and oils.
We believe that the Application Labs play an important role by helping us better understand the requirements of
our customers and customize our products to cater to their ever evolving requirements. We also propose to set up
an Application Lab in Denmark and going forward, we intend to set up additional Application Labs across our
key markets per business requirements.
Dresen Mexico has a portfolio of products such as animal nutrition products, antioxidants, adsorbents, acidifying
agents, bactericides, binders and mould inhibitors. The products are sold across geographies, in Mexico, Central
America and parts of South America. We intend to improve the geographical reach of Dresen’s product portfolio
by leveraging our global network.
4) To accelerate growth through strategic acquisitions and partnerships
While continuing to maintain our growth, we seek to pursue strategic acquisitions to extend our existing portfolio
of products, strengthen our technological capabilities, broaden our business segments and increase our market
share in the blends, vanillin and performance chemical verticals. Our acquisition of CFS Europe has been
successfully integrated with our business and we have grown the revenues from this business over a short period
of time. We anticipate such acquisitions may act as an enabler to grow our business, provide us with an increased
market penetration in our existing markets or enable us to establish an immediate presence in new markets and
our recent acquisition of Dresen Mexico is in line with this strategy. We are currently evaluating acquisition
opportunities in India, China and certain other overseas markets and aim to harness our experience of acquiring
and integrating new markets, technologies and products with our current operations.
Our History
Our Company was incorporated on November 30, 1993 pursuant to certificate of incorporation issued by RoC, as
a private limited company under the name of “Camlicon Consultants Private Limited”. The name of our Company
was changed to “Camlin Fine Chemicals Private Limited” and a fresh certificate of incorporation consequent upon
change of name was issued by the RoC on June 1, 2006. The name of our Company was changed to “Camlin Fine
Chemicals Limited” and a fresh certificate of incorporation consequent upon change of name on conversion to
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public limited company was issued by the RoC on August 11, 2006. In 2006, the “Fine Chemical Division” of
Kokuyo Camlin Limited (erstwhile Camlin Limited) was de-merged into Camlin Fine Chemicals Limited in terms
of the scheme of arrangement sanctioned by the Bombay High Court pursuant to its order dated November 17,
2006. Pursuant to the aforesaid de-merger, our Company was listed on BSE in 2007. In 2011, our Company
amalgamated with our erstwhile wholly owned subsidiary, Sangam Laboratories Limited pursuant to a scheme of
amalgamation approved by the Bombay High Court by its order dated April 21, 2011. The name of our Company
was changed to “Camlin Fine Sciences Limited” and a fresh certificate of incorporation consequent upon change
of name was issued by the RoC on August 27, 2011. In 2015, our Company got listed on NSE.
Some of the key milestones of our Company since then are as follows:
Year
Key Milestones
2007
Listed on BSE pursuant to de-merger of “Fine Chemical Division” of Kokuyo Camlin Limited
(erstwhile Camlin Limited)
Acquired CFS Europe and became an integrated manufacturer of Diphenols
Launched a wide range of performance chemicals like MEHQ, TBC, Veratrole, Guaiacol etc.
Launched aroma and flavoring compounds ‐ Vanillin/ Ethyl Vanillin
Set up food application laboratories with fully supported technical team
Commenced manufacturing and marketing of value added customized antioxidants blends in
Tarapur and Brazil manufacturing facilities
Forayed into antioxidants blends business in USA
Got listed on NSE
CFS Mexico acquired 65% stake in Dresen Mexico
2011
2012
2014
2015
2016
Our Group
We conduct our business through our group, which includes our Subsidiaries. All our Subsidiaries are incorporated
in foreign jurisdictions. Below is a structural representation of our group:
Dresen Mexico Acquisition
Our Company, through CFS Mexico, has acquired an aggregate of 65% of shareholding in Dresen Mexico
pursuant to a stocks purchase agreement dated February 2, 2016 entered into with Vicente Sánchez Enriquez and
another stocks purchase agreement dated February 2, 2016 entered into with Controladora De Servicios riso,
S.A.P.I. De C.V. (“Controladora”). Further, CFS Mexico and Controladora has proportionately subscribed to
further shares of Dresen Mexico. The aggregate cost incurred in respect of Dresen Acquisition and further
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subscription of shares in Dresen Mexico is USD 7.80 million. Dresen Mexico has five wholly owned subsidiaries
in Mexico, Peru, Guatemala, Columbia and Dominican Republic. The acquisition was completed on May 4, 2016.
Further, CFS Mexico, Controladora and Dresen Mexico has entered into a shareholders’ agreement dated May 4,
2016 for providing a mechanism of governance of certain affairs of Dresen Mexico (the “CFS SHA”).
Dresen is engaged in manufacturing, blending and distribution of specialty chemicals used primarily by the food,
feed and pet food industries. Dresen has a portfolio of products including animal nutrition products, antioxidants,
adsorbents, acidifying agents, bactericides, binders and mould inhibitors. Primary market segments in which
Dresen sells its products are poultry, cattle, pet food, aquaculture, oil and fats, dairy, flavouring and bakery. We
believe that with the Dresen Acquisition, our product portfolio will substantially widen in the pet food and animal
feed segment. Based on the current sales mix, efficiency of processes and equipment in operation, the installed
capacity of the manufacturing facility of Dresen is approximately 12,000 metric tons per annum. Through Dresen,
which has its own sales force and distribution network, our Company will gain access to markets across Mexico
and in North, Central and South America.
Our Business Verticals
We categorise our business into four different verticals based on our product portfolio, namely: (i) Diphenols; (ii)
Shelf-life Extension Solutions; (iii) Performance Chemicals, and (iv) Aroma. Below is a graphical representation
of value chain of our key products:
Diphenols
Our Diphenols business includes manufacturing of Hydroquinone and Catechol, key raw materials for
manufacturing of our various products in different segment. While we use a large part of the Diphenols we produce
internally, we also sell Diphenols to external customers. Diphenols are key raw materials for chemicals used in
industries such as petrochemicals, pharmaceuticals, flavours and fragrances, agrochemicals, dyes and pigments.
Further, Hydroquinone by itself has application as polymerisation inhibitor in petrochemical industry.
Manufacturing
Our manufacturing facility in Italy provides captive requirements of key raw materials Hydroquinone and
Catechol, making most of our business segments vertically integrated. The proposed new manufacturing facility
at Dahej, SEZ, upon commissioning would significantly increase our capacities to produce Diphenols and will
also enable us to optimise logistics and inventory costs through establishing an alternate source of Diphenols in
India.
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Markets
We primarily market our Diphenols in Europe and Asia.
Customers
Our customers include large multi-national companies, regional companies and local manufactures of speciality
chemicals, pharmaceuticals, agro chemicals, aroma chemicals and petrochemicals.
Shelf-life Extension Solutions
Our Shelf-life Extension Solutions include a range of antioxidant solutions used to increase the shelf life of oils
and fats, which in turn are used in processed food products like bakery, animal feed, pet food, confectionery, fried
snack foods and dairy. Our Shelf-life Extension Solutions helps in retaining shelf-life of food products. Shelf-life
Extension Solutions delay some types of cell damage, by stopping the chain reaction of oxidation, thereby
extending shelf life of various products. Our Shelf-life Extension Solutions primarily include anti-oxidants
chemicals and antioxidant blends, which could be sourced from natural or synthetic substances, and are available
both in liquid and dry solutions. Our Shelf-life Extension Solutions portfolio of blends consists of traditional
antioxidant solutions, which we brand and market as Xtendra and also natural shelf-life extension solutions, which
we brand and market as Nasure. Traditional antioxidant solutions are primarily sourced from Diphenols, while
natural shelf-life extension solutions are sourced from rosemary extracts, green tea and mixed tocopherols. Below
is a tabular representation of our Shelf-life Extension Solutions portfolio:
Products
BHA
TBHQ
Ascorbyl Palmitate
Blends
Application
Food and feed antioxidant to extend shelf life of products. It is used amongst other
applications in oils, fats, butter, pet food and margarine
Food antioxidant to extend shelf life of products. It is used amongst other
applications in oils, fats, butter and margarine. Also into technical applications like
printing inks and paints
Anti-oxidant in for sensitive products like baby food, instant milk formula, premium
bakery fats and speciality oils.
Food, feed and pet food antioxidants to extend shelf life of products
Manufacturing
We are one of the leading manufacturers of food grade antioxidants, TBHQ and BHA. TBHQ, BHA and Ascorbyl
Palmitate are manufactured at our Tarapur facility. The basic raw material required for manufacturing TBHQ and
BHA is Hydroquinone, which is primarily sourced from our manufacturing facility in Italy. Post commissioning
of our manufacturing facility at Dahej, SEZ, we will also source Hydroquinone from Dahej.
We develop and offer products to our existing and new customers based on customer requirements. We blend
antioxidants to meet customer needs. We consider customer requirements to be an important manufacturing factor.
We rely on our R&D team to customise products as per customer needs. Our Blending Business is conducted at
our blending units in Tarapur,India, Indiatuba-Brazil, and at a contractual blending unit in USA. Post Dresen
Acquisition, we also have a manufacturing and blending facility in Mexico City, Mexico.
Markets
We primarily market our Shelf-life Extension Solutions products in North America, Central America, South
America, Europe, Asia, Africa and Middle East. The global antioxidants market was valued at USD 3.18 billion
in 2013 and is expected to reach US$4 billion by 2018, growing at a CAGR of 4.70% (Source: TechNavio Industry
Report).
Customers
Our customer include large multi-national companies, regional companies and local manufactures of anti-oxidant
formulators and blending companies, food processing and oil and fat producing companies. Post our Dresen
Acquisition, we cater to customers in food, pet food, feed and animal nutrition segments.
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Performance Chemicals
Our Performance Chemicals products are speciality chemicals, which are derivatives of either Catechol or
Hydroquinone and have wide applications in sectors such as food flavouring, pharmaceuticals intermediate,
petrochemicals, agrochemicals, dyes and pigments and fragrance industry. Below is a tabular representation of
few products from our Performance Chemicals product portfolio:
Products
Application
Guaiacol
Intermediate for flavours and fragrances and pharma products
Veratrole
Building blocks for other compounds in agrochemicals, consumer goods and healthcare
TBC
PDMB
CME
Stabilization of monomers
Intermediate for dyes and colours
Intermediate for dyes, pigment and colours
MEHQ
Stabilization of monomers
Manufacturing
Our Performance Chemicals products are manufactured in our Tarapur manufacturing facility in India as well as
at third party manufacturing facilities in Khopoli and Mahad, Maharashtra on a contractual basis. Performance
chemicals products are generally derivatives of either Catechol or Hydroquinone, which are primarily sourced
from our manufacturing facility in Italy. Post commissioning of our new manufacturing facility at Dahej, SEZ,
we will also source Hydroquinone and Catechol from therein.
Markets
We primarily market performance chemicals in Europe, Asia, South America, Africa and Middle East.
Customers
Our customer include large multi-national companies, regional companies and local manufactures, operating
primarily in petrochemical, agrochemical, dyes and pigments, pharmaceutical, aroma and fragrance segment.
Aroma
Our Aroma business involves production of (i) Vanillin, and (ii) Ethyl Vanillin. Our Vanillin Products are widely
used in flavours and fragrances, agro, feed, food, incense sticks, pharmaceutical products and to give food and
beverages a flavour of vanilla and to enhance other flavours or to mask or smoothen unwanted flavours. Ethyl
Vanillin has stronger aroma and is used in products/ segments that require those attributes.
Manufacturing
Our Vanillin Products are currently manufactured at our own facility in Tarapur, India and at a third party
manufacturing facility in Yuyao Zhejiang, China. The basic raw materials required for manufacturing of Vanillin
and Ethyl Vanillin are Guaiacol and Guethol, derivatives of Catechol which is primarily sourced from our
manufacturing facility in Italy. Post commissioning of our manufacturing facility at Dahej, SEZ, we will also
source Catechol and Guaiacol from therein.
Markets
We primarily market Vanillin Products in Europe, Asia, South America, North America and Middle East. Globally
the Vanillin market, on the whole, has been valued at USD 642.33 million in 2014 and is expected to grow at a
CAGR of 5.54 percent to reach USD 885.09 million by 2020. (Source: TechNavio Industry Report)
Customers
Our customer include large multi-national companies, regional companies and local manufactures, operating
primarily in food and beverage, feed, pharmaceutical and flavours and fragrance segment.
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Other Business
Our Company is also engaged into manufacturing and marketing of hardware and decorative accessories for door
and window locks, handles etc. on behalf of Hardware Renaissance, USA, pursuant to a licensing agreement (the
“H&R Agreement”). Under the H&R Agreement, our Company is authorised to manufacture and market
hardware and decorative accessories for door and window locks, handles etc. under the brand name “Hardware
Renaissance” and as a consideration, pay royalty to Hardware Renaissance, USA. We also make direct sales to
Hardware Renaissance, USA. We outsource the manufacturing to third parties on job work basis.
Our Company is endeavouring to foray into pre and post-harvest agro products which are growth enhancers and
will have antimicrobial properties. We have already launched a few products on pilot project basis.
Manufacturing Facilities
We have manufacturing and blending facilities in India, Brazil and Italy. With Dresen Acquisition, we also have
a manufacturing unit and blending facility in Mexico. Our manufacturing facilities are either operated by our
Company or our Subsidiaries. We are also in the process of commission of a new manufacturing facility in Dahej,
SEZ. Below is a tabular representation of our manufacturing facilities:
Manufacturing facility location
Capacity (MT/year)
Tarapur, India
Ravenna, Italy
Indaiatuba, Brazil
Mexico City, Mexico
Dahej, India (not yet commissioned)
7,200*
12,000
4,382.40
12,000
18,000
(estimated)
* In terms of consent to operate dated February 24, 2016, the Tarapur manufacturing facility has obtained an approval for combined
production limit of 3,502.2 MT/year. Our Company has made an application dated May 4, 2016 to the Maharashtra Pollution Control Board
for enhancement of combined production limit at the Tarapur manufacturing facility.
Outsourced Manufacturing
We undertake certain manufacturing through contractual arrangement with third parties, whereby the
manufacturing of our products are undertaken by such third parties. Under such aforesaid contractual arrangement
for third party manufacturing, our Company typically provides the production plan, technical, engineering, quality
assurance and control support including additional machinery and manpower, if need be. Raw materials for
production are provided by our Company either through internal sources or third party suppliers. We manufacture
our various products through third party manufacturing units at Tarapur, Khopoli and Mahad in Maharashtra,
India, Iowa, USA and Yuyao Zhejiang, China, on contractual basis. All our outsourced manufactured products
are marketed by us in our brand names.
Research and Development
We have R&D units in Tarapur, India and in Ravenna, Italy. We also have a pilot plant in Tarapur, India. Our
R&D units are focused on developing chemical compounds, new manufacturing processes and improving existing
processes and new chemistry with a focus on developing new derivatives of Diphenols or improve the commercial
viability thereof. New processes which are developed in our R&D units are implemented in small scale in our
pilot plant to understand the efficacy and challenges before commercially manufacturing such products.
Our Company also has Application Labs in Mumbai, USA, Mexico and Brazil. Application Labs are primarily
involved with customising blends for various applications across our Shelf-life Extension Solutions. Application
Labs also provide technical assistance and development support to our customers, test the efficacy of various
products that are produced by our customers on defined parameters relevant to our products and conduct studies
to determine the shelf life of various products.
Our R&D units have advanced technological equipment to develop, test and evaluate our products. We have a
strong and dedicated research team of  employees in our various R&D facilities Application Laboratories. Our
focus on research and development has been instrumental in enabling the number of products we have introduced
over the years, which we believe improves the performance of our business. Most of our products have been
developed in-house by our R&D units. Our R&D abilities have led to grant of three patents each in India, Europe
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and South Africa. We have also applied for a process patent for generating a mixed multicomponent vapour for
preparation of Monoalkyl Ethers of Diphenols in India.
Our research and development unit in India has been recognised by the Government of India’s Department of
Scientific and Industrial Research as an in-house research and development unit.
Quality Control and Testing
We believe that maintaining high standard of quality of our products is critical to our brand and continued growth.
Across our various manufacturing facilities, we have put in place quality systems that cover all areas of our
business processes from manufacturing, supply chain to product delivery to ensure consistent quality, efficacy
and safety of products. Through our regular internal audits, we ensure that our manufacturing facilities are in
compliance with local and international regulatory requirements.
We implement and maintain best industry practices including for, adequate premises and space, suitable
equipment and services, appropriate materials, approved procedures and instructions, and equipped laboratories.
Our employees are required to undergo thorough training programs designed to update them on latest quality
norms and standards periodically.
Our quality function monitors all stages of product development. Various in-process quality checks are performed
to monitor product quality during manufacturing process. Final finished products are tested as per the
predetermined quality specifications before release in the market. Each batch of the manufactured products is
dispatched to our quality control and testing laboratories where they go through different levels of testing to test
the physical properties, purity and quality of the end products to ensure traceability and repeatability for each
batch. We employ trained and experienced members to conduct evaluation procedures for quality control and
testing. In addition to our in-house quality testing of our products, we conduct periodic quality audits of our
manufacturing units to verify and ascertain effective implementation of quality management systems. We have
an independent, fully equipped quality laboratory where the manufactured products are tested with respect to their
application. All of our manufacturing facilities also have waste management and environment protection systems
designed to comply with laws on environmental pollution.
Our Company has achieved various manufacturing certifications such as ISO 22000:2005, ISO 9000:2008,
FAMIQS, Kosher and Halal.
Environment, Health and Safety
Manufacturing is subject to a number of national and regional laws and regulations. These include in particular,
regulations on technical safety and environment protection, including, among others, restriction of air pollution
and noise, discharge of waste products into water above and below the ground and other occupational health and
safety regulations. Further, our offices and manufacturing plants in India are required to comply with several laws
governing every aspect of our operations, including compliance with building regulations, consumer protection,
occupational health, safety and protection of labourers and food safety and standards. For further details, see
“Regulations and Policies” on pages 97.
Sales and Marketing
We primarily market our products through our own sales team. Our established sales and marketing department
has separate teams focusing on each of our business verticals. We have a wide sales and marketing network,
spread across the globe. We have our own sales and marketing team in various jurisdictions including India,
China, Netherlands, Italy, Brazil, Peru, Columbia, Guatemala, United Kingdom, Denmark, Mexico, Cuba and
USA, headed by experienced professionals. Through the recent Dresen Acquisition, which has its own sales force
and distribution network, our Company has gained access to markets across Mexico and in North, Central and
South America.
In certain jurisdictions such as Indonesia, Middle East and in certain parts of India, where we do not have our own
sales team, we typically enter into distribution arrangements with our business partners in such jurisdictions to
market and distribute our products.
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Human Resource
We place importance on developing our human resources. Through internal trainings and workshops, our human
resources team tracks the progress of our employees through systematic individual development plans. As of June
15, 2016, we employed a total of 454 individuals, out of which 307 employees work in India and rest are employed
in other jurisdiction. We also employ labourers on contracts through third parties, primarily at our manufacturing
facilities. The breakdown of our employees in different functionalities has been provided below:
Function
In India
116
23
34
32
100
2
Manufacturing
Sales and Marketing
Research and Development
Quality Control
Finance, Human Resources and Operations
Legal and secretarial
Number of Employees
Overseas
42
35
11
4
55
-
Competition
Our competitors include large speciality chemical companies abroad.
We believe that the key competitive factors that will affect the development and commercial success of our current
products and any future products that we may develop are price, reliability of supply and quality.
Many of our competitors are larger than us and have greater financial, manufacturing, R&D and other resources.
For additional information, see “Risk Factors – We face intense competition from both global speciality chemicals
companies, which could significantly limit our growth and materially adversely affect our financial results.” on
page 43.
Information Technology
Our information technology systems provide support to all aspects of our business, from manufacturing, sales,
planning, operations and documentation to accounts and customer service. Our internal information technology
division supports our various business lines operations. We have a dedicated information technology team in our
Company. Our Company has implemented enterprise resource planning system to leverage business value by
centralising accounting systems across all locations, in India and abroad, leading to cost optimization. We have
also developed an in-house web-portal and mobile based application integrated with our enterprise resource
planning system to monitor the performances of our representatives. Our information technology team does
regular inspection and audits of all our network systems and servers to prevent them from external threats. Our
Company believes that its advanced information technology systems not only enhance the Company’s operational
efficiency and customer service quality, but also reduce operating costs of the Company, enable the Company to
respond to the market promptly and enhance its ability to handle emergency situations, making it more competitive
in the market. For additional details see “Risk Factors – Any failure of our information technology systems could
adversely affect our business and our operations.” on page 46.
Insurance
We have industrial all risk policy, boiler and pressure plant insurance and standard fire policy for our
manufacturing facilities and office premises insuring substantially all of our assets such as buildings, plant and
machinery, furniture, fixtures and fittings, from risks such as fire, earthquake and machinery breakdown. We also
have fire floater policy and burglary policy insuring our stocks and stocks in progress from various risks of theft
and damage. We also maintain a product liability insurance to reduce our risk of product liability claims. In
addition, we maintain commercial general liability insurance, marine cargo annual turnover policy, public liability
policy, electronic equipment insurance, money insurance and commercial general liability policy. We also
maintain workmen compensation policy, medical insurance policies, personal accident insurance policies, and
business travel and accident insurance for our employees. Our manufacturing facilities and other assets in other
jurisdiction are insured from various risks, through our respective Subsidiaries in such jurisdictions. Our policies
are subject to customary exclusions and customary deductibles. We believe that our insurance coverage is
consistent with industry standards for companies in India. For additional details see “Risk Factors – Our insurance
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coverage is limited; if we experience uninsured losses, it could adversely affect our financial condition and results
of operations” on page 42.
Intellectual Property
Our Company has been granted three patents, each in India, Europe and South Africa. We have also applied for a
process patent for generating a mixed multicomponent vapour for preparation of Monoalkyl Ethers of Diphenols
in India. Our Company has registered five trademarks and have applied for 20 trademarks application for its
products with various Registrar of Trademarks. Our Company has also applied for trademark registration for our
Company’s logo under various classes of the Trademarks Act, 1999, with the Registrar of Trademarks. Our
Company has not applied for trademark registration of its name. For additional details see “Risk Factors – If we
are unable to adequately protect our intellectual property, or if the scope of our intellectual property fails to
sufficiently protect our proprietary rights, other pharmaceutical companies could compete against us more
directly, which may have a material adverse impact on our business and results of operations.” on page 41.
Property
Our registered office is situated at WICEL, Plot No. F/11 and F/12, Central Road, Opposite SEEPZ Main Gate,
Andheri (East), Mumbai 400 093. We do not own our registered office premises. We have entered into a lease
agreement dated November 9, 2014 with Texport Industries Private Limited for leasing of our registered office for
a period till October 31, 2019. Our manufacturing facility in Tarapur, Maharashtra and our proposed manufacturing
facility in Dahej SEZ are on leasehold premises on long term basis. Our manufacturing facility in Mexico and
blending facility in Brazil are owned by the respective Subsidiaries in such jurisdiction on leasehold basis. Our
manufacturing facility in Italy is owned by CFS Europe on freehold basis.
Legal Proceeding
We are involved in various lawsuits, claims, investigations and proceedings, which arise in the ordinary course of
our business. In terms of Policy for Determination of Materiality of Events or Information, as adopted by the Board
on February 12, 2016, our Company is not involved in any material outstanding litigation. For details, see “Legal
Proceedings” on page 152.
Corporate Social Responsibility
Our Company endeavors to make CSR a key business process for sustainable development and welfare of the
needy sections of the society. Our Company engages in CSR activities in the areas of education including special
education and employment enhancing vocation skills especially among children, women and differently abled,
healthcare, sanitation and hygiene, promoting gender equality, empowering women and measures for reducing
inequalities faced by socially and economically backward classes, sustainable livelihood and right social causes.
In the Fiscal 2016, our Company spent Rs. 63.57 lakhs towards CSR activities, through various trusts and nongovernmental organisations, such as Akhil Bharatiya Vanvasi Kalyan Ashram, Sangopita –A shelter for care,
Vivekananda Kendra, Shushrusha Hospital working in sectors such as upliftment of tribal backward class, special
education for differently abled, youth empowerment, education and empowerment of economically backward
groups. Our board has constituted a CSR committee which comprises of three members namely, Abeezar E.
Faizullabhoy, Dilip D. Dandekar and Ashish S. Dandekar.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis of our financial condition and results of operations is based on, and should
be read in conjunction with, our Audited Consolidated Financial Statements and the related notes, schedules and
annexures thereto included elsewhere in this Preliminary Placement Document. The consolidated financial
statements reflect applicable statutory requirements and regulatory guidelines and accounting practices in India.
Indian GAAP and Indian accounting standards may differ in certain material respects from generally accepted
accounting principles and accounting standards in other countries, IFRS.
Our Company’s fiscal year ends on March 31 of each year. Accordingly, all references to a particular fiscal year
are to the twelve-month period ended March 31 of that year.
This discussion contains forward-looking statements and reflects our current views with respect to future events
and financial performance. Actual results may differ materially from those anticipated in these forward-looking
statements as a result of certain factors such as those set forth in “Risk Factors” beginning on page 33 of this
Preliminary Placement Document.
Overview
We are a vertically integrated company, engaged in research, development, manufacturing, commercialising, and
marketing of speciality chemicals and blends which are used in a wide array of food, feed, animal and pet nutrition
and industrial products. We categorise our business into four different verticals based on our product portfolio,
namely: (i) Diphenols; (ii) Shelf-life Extension Solutions; (iii) Performance Chemicals, and (iv) Aroma. We have
recently added animal nutrition to our portfolio of products pursuant to our recent Dresen Acquisition and going
forward we expect this to complement our Shelf-life Extension Solutions portfolio. We market our products
globally including in Europe, Asia Pacific, India, South and Central America and North America.
The key raw material used for manufacturing a large part of our products is Hydroquinone and Catechol. Our
Company manufactures both these products as a part of our Diphenols business. While we use a large part of the
Diphenols we produce internally, we also sell Diphenols to external customers. Our Shelf-life Extension Solutions
include a range of antioxidant solutions used to increase the shelf life of oils and fats, which in turn is used in
processed food products like bakery, animal feed, pet food, confectionery, fried snack foods and dairy. We also
manufacture antioxidant blends (“Blending Business”), which we market under brands Xtendra and NaSure. Our
Performance Chemicals vertical includes production of amongst others, Guaiacol, Veratrole, TBC and MEHQ,
which are derivatives of either Catechol or Hydroquinone and have wide application in sectors such as food
flavouring, pharmaceuticals intermediate, agrochemicals, dyes and pigments and fragrance industry. Our Aroma
vertical primarily includes production of Vanillin and Ethyl Vanillin (“Vanillin Products”) which are marketed
under the brands Vanesse and Evanil. The key raw materials used to manufacture our Vanillin Products are
Guaiacol and Guethol, respectively, which in turn are derived from Catechol. Our Vanillin Products are used to
give food and beverages a flavour of vanilla, to enhance other flavours or to mask unwanted flavours and are used
in food, flavour and fragrance, incense sticks, pharma and cattle feed segments. We have recently acquired a 65%
shareholding in Dresen Mexico. Dresen manufactures and markets a range of animal nutrition products,
antioxidants, adsorbents, acidifying agents, bactericides, binders and mould inhibitors.
Our manufacturing facility in Italy provides captive requirements of key raw materials Hydroquinone and
Catechol, making most of our business segments vertically integrated. While we consume a large part of this
internally for our manufacturing processes in India, we also buy and sell the Diphenols in global markets,
depending on market conditions, our internal requirements and prices in global markets and in India. The proposed
new manufacturing facility at Dahej, SEZ, upon commissioning would significantly increase our capacities to
produce Diphenols and will also enable us to optimise logistics and inventory costs through establishing an
alternate source of Diphenols in India. We believe that this new manufacturing facility at Dahej will fulfil our
internal requirement of Diphenols thereby protecting us from relying on imports for our raw key materials. This
also reduces the risk of unfavourable terms of supply such as high pricing and long timeline for delivery. Our
Shelf-life Extension Solution products are manufactured in our Tarapur manufacturing facility in India. Our
Blending Business is conducted in our blending facilities Tarapur, India, Indaiatuba, Brazil and Mexico City,
Mexico. We also have a contractual arrangement in Iowa, USA for outsourcing our Blending Business to a third
party blending unit. In respect of our Performance Chemicals business, various derivatives of Diphenols are
manufactured at our facilities in Tarapur, India and shall also be manufactured in the proposed new manufacturing
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facility at Dahej, SEZ, once commissioned. Derivatives of Diphenol are also manufactured at third party
manufacturing facilities in Khopoli and Mahad, Maharashtra on contractual basis. Our Vanillin Products are
currently manufactured at our own facility in Tarapur, India and at a third party manufacturing in Yuyao Zhejiang,
China, on contractual basis. Going forward, Vanillin Products will also be manufactured at the proposed new
manufacturing facility at Dahej, SEZ. Guaiacol and Guethol, which are derived from Catechol and are raw
material required for Vanillin Products, are manufactured in Tarapur, India and Mahad, India. Dresen has a
blending and manufacturing facility in Mexico which is used to manufacture animal nutrition products,
antioxidants, adsorbents, acidifying agents, bactericides, binders and mould inhibitors.
.
We are focused on R&D and innovation and have R&D units in Tarapur, India and in Ravenna, Italy. Our R&D
units are focused on developing chemical compounds, new manufacturing processes and improving existing
processes and new chemistry with a focus on developing new derivatives of Diphenols or improving the
commercial viability thereof. We also have a pilot plant in Tarapur, India. New processes which are developed in
our R&D units are implemented in small scale in our pilot plant to understand the efficacy and challenges before
commercially manufacturing such products. Our R&D units have advanced technological equipment to develop,
test and evaluate our products. Our Company also has application laboratories (“Application Labs”) in Mumbai,
USA, Mexico and Brazil. Application Labs are primarily involved with customising blends for various
applications across our Shelf-life Extension Solutions. Application Labs also provide technical assistance and
development support to customers, test the efficacy of various products that are produced by our customers and
conduct stability studies for determining the shelf life of various products. We have a dedicated R&D team
comprising of  employees.
We have a wide sales and marketing network, spread across the globe. We have our own sales and marketing team
in various jurisdictions including India, China, Netherlands, Italy, Brazil, Peru, Columbia, Guatemala, United
Kingdom, Denmark, Mexico, Cuba and USA, headed by experienced professionals. Our established sales and
marketing department has separate teams focusing on each of our business verticals. In certain jurisdictions such
as Indonesia, Middle East and in certain parts of India, we market and sell our products through third parties, with
whom we have sales and distribution arrangements. We have a team of 58 employees in our sales and marketing
team across the globe.
Our gross revenue from operations for the financial year Fiscal 2016 stood at Rs. 50,422.83 lakh as against
Rs.57,057.68 lakh in Fiscal 2015 and Rs.51,716.91 lakh in Fiscal 2014 (on a consolidated basis). Our EBITDA
for Fiscal 2016, 2015 and 2014 was Rs.9,606.34 lakh, Rs. 9,254.91 lakh and Rs.7,130.88 lakh, respectively and
our profit for the year was Rs. 3,582.37 lakh, Rs.5,502.73 lakh and Rs.2,871.30 lakh, respectively.
Significant Factors Affecting Our Results of Operations and Financial Condition
Our financial condition and results of operations have been affected and will be continue to be affected by various
factors including the following factors of particular importance:
Price Pressure
To a certain degree, we are affected by the price pressure to which our customers are subject, because they try to
pass this pressure on to their suppliers, including us. This effect is moderated by the fact that, in spite of their
importance for the success of the end product, our shelf life extension products make up only a relatively small
proportion of the total cost of our customers’ finished products. We try to offset the effects of this price pressure
on our margins by increasing the productivity of our operations and focusing on cost efficiency in our procurement
of raw materials. In addition, we try to use our technological and innovative strength in various areas to lay greater
emphasis on innovative products, which generally achieve higher margins and are less susceptible to price
pressure.
There is fierce competition between manufacturers of chemical products, which is carried out on the basis of the
technological and innovative strength of the manufacturers, rather than on the basis of price. At product level,
there tends to be less price pressure in customer-specific businesses, but there is greater price pressure for
standardized products, due to the comparability of the products and the large number of competitors.
Fluctuations in the Prices of Raw Materials
The costs of raw materials make up a large portion of our production costs. Our consumption of raw materials
accounted for a significant portion of our total expenses. The prices of raw materials which we commonly use in
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our manufacturing process are Diphenols, which has witnessed volatility in the past. The prices of these raw
materials depend on market developments, which are influenced by factors such as the market prices of base
substances, for example crude oil, in the case of our synthetic raw materials. We may not be able to pass on such
price increases to our customers.
Exchange Rate Risk
We generate a significant portion of our sales internationally through export and sales outside of India. These
sales, together with a portion of our raw materials expenditure, are denominated in foreign currencies, primarily
in United States Dollars, Euro, Brazilian Real and Mexican Peso. Consequently, our results of operation are
influenced by exchange rate fluctuations between foreign currencies of the market in which we sell our products
and the Indian Rupee. Our foreign exchange exposure is mitigated to the extent of our revenues from our overseas
operations and costs of operations which are denominated in foreign currencies. However, exchange rate
fluctuations could affect the amount of income and expenditure. Given the complex global political and economic
dynamics that affect exchange rate fluctuations, it is difficult to predict future fluctuations and the effect these
fluctuations may have upon or our overall financial condition. Significant currency exchange rate fluctuations and
currency devaluations could have an adverse effect on our results of operations from period to period. In addition,
our financial statements are denominated in Indian Rupees and our material subsidiaries report their earnings in
foreign currency. For these reasons, our financial condition and results of operations are influenced by fluctuations
in the relative values of the relevant currencies.
Acquisition of Dresen Mexico
This Preliminary Placement Document does not include any pro forma profit and loss statement or balance sheet
prepared in accordance with the laws and regulations of any jurisdiction, which would have shown the effect of
our acquisition of a 65% shareholding in Dresen Mexico and the impact of this acquisition on our historical results
of operations and financial condition.
Our wholly owned subsidiary CFS Mexico has acquired a 65% shareholding in Dresen Mexico with effect from
May 4, 2016. Dresen is engaged in manufacturing and distributing specialty chemicals used by the food, feed,
animal nutrition and other industries. Dresen markets its products through its own sales team directed from its
headquarters and its branches and a network of distributors in North, Central and South America. With this
acquisition, our Company will be able to further expand its market reach in the North, Central and South America,
along with access to processes and technology in Animal Nutrition segment. Our Company will also be able to
cross sell its existing products to the customers of Dresen.
Research, Product Development and Product Portfolio
Our business depends to a significant degree on our ability to successfully conduct research and development with
respect to our products and to adapt our existing product offering to customer requirements. Innovation from our
research and development and creation activities is a basic prerequisite for sustainable success. Our R&D units
are focused on developing chemical compounds, new manufacturing processes, improving existing processes and
new chemistry with a focus on developing new derivatives of Diphenols or improving the commercial viability
thereof. As a result of our research and development efforts and operating history, we are able to produce products
across our four verticals, namely (a) Diphenols; (b) shelf life solutions; (c) performance chemicals; and (d) aroma.
This process is both time consuming and costly, and involves a high degree of business risk. To develop our
product portfolio, we commit substantial time, funds and other resources. We expect our research and
development expenses to increase in line with our business and operations. In addition, our research staff is critical
to the success of our research and development efforts. Our investment in research and development for future
products and to bring about efficiencies in our manufacturing processes could result in higher costs without a
proportionate increase in income. In addition, we must adapt to rapid changes in our industry due to technological
advances and scientific discoveries. If our existing products become obsolete, and we are unable to effectively
introduce new products, our business and results of operations could be adversely affected. Although we strive to
keep our technology, facilities and machinery current with the latest international standards, the technologies,
facilities and machinery we currently employ may become obsolete. The cost of implementing new technologies,
upgrading our manufacturing facilities and retaining our research staff could be significant and could adversely
affect our profitability.
86
Significant Income from Our Top Ten Customers
We have historically derived, and may continue to derive, a significant portion of our income from our top ten
customers. For Fiscals 2016, 2015 and 2014, 47.89%, 48.69% and 50.46%, respectively, of our consolidated total
income were derived from our top ten customers. Any reduction in orders from our top ten customers would
adversely affect our income.
Government and Other Regulatory Approvals
We have focused on broadening our income base to cover India as well as several other countries. As a result, our
products are subject to regulation by numerous Indian and foreign regulatory agencies and similar agencies in
other jurisdictions. Each of these agencies requires us to comply with laws and regulations governing the
development, testing, manufacturing, marketing and distribution of our products and we are required to maintain
various approvals, licenses, registrations and permissions for our business activities which are lengthy and
expensive.
Our business, prospects, results of operations and financial condition could be adversely affected if we fail to
obtain, or comply with applicable conditions that may be attached to, our approvals, licenses, registrations and
permissions. Further, even if we obtain all necessary approvals and licenses to sell a product in a particular market,
regulatory agencies may reassess the safety of our products which may result in the withdrawal of the existing
approvals, which in turn could result in loss of income.
Industry Competition and Consolidation
Our products face intense competition from products commercialized or under development by competitors in our
product verticals. Our business, prospects, results of operations and financial condition could be adversely affected
if our competitors gain significant market share in areas in which we are focused. Many of our competitors may
have greater financial, manufacturing, research and development, marketing and other resources, more experience
in obtaining approvals, greater geographic reach, broader product ranges and stronger sales forces. We also
operate in a rapidly consolidating industry. Our competitors are consolidating, and the strength of the combined
companies could affect our competitive position in all of our business areas.
Accordingly, our results of operations depend significantly on various factors such as the demand for our products
in the markets we operate in, our ability to manage our growth strategy and expansion plans, including our ability
to grow our exports and our ability to grow and manage our distribution network in India.
Presentation of Financial Information
Basis of Preparation
The financial statements of our Company have been prepared in accordance with the historical cost convention
and on accrual basis in accordance with generally acceptable accounting principles in India. These financial
statements have been prepared to comply in all material respects with the Accounting Standards specified under
Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014 (as amended)
and other relevant provisions of the Companies Act, 2013.
The financial statements are prepared and presented in the form set out in Schedule III of the Companies Act,
2013 so far as they are applicable thereto. All assets and liabilities have been classified as current or non-current
as per our Company’s normal operating cycle and other criteria set out in the Schedule III of the Companies Act,
2013. Based on the nature of products and their realisation in cash and cash equivalents, our Company has
ascertained its operating cycle as twelve months for the purpose of current/ non-current classification of assets
and liabilities.
For a description of our significant accounting policies adopted in the preparation of the consolidated financial
statements, see “Financial Information” on page 157.
Segment Information
Our Company operates primarily in the segment of speciality chemicals and hence has only one reportable product
segment.
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Income and Expenditures
Our income and expenditures are determined and reported in the following manner:
Income
Total income consists of income from operations, other operating income and other income.
Revenue from Operations: Income from operations primarily comprises sale of our finished goods, traded goods
and services.

Sale of products: Sale of products comprises of sales of finished goods that we manufacture at our
manufacturing facilities and trading sales; and

Sale of services: Sale of services comprises of income from job works.
Other Operating Income: Other Operating income comprises primarily of export incentives and scrap sales.
Other Income: Other Income comprises primarily of interest income and gain on foreign exchange fluctuations.
Expenditures
Our expenditure consists of cost of materials consumed, purchase of stock in trade, changes in inventory of
finished goods/ work-in-progress (“WIP”)/ stock in trade, employee benefits expenses, finance costs, depreciation
and amortization expenses, research and development expenses, other expenses and tax expenses.
Cost of raw materials consumed: Cost of raw materials consumed include consumption of raw materials such as
Tertiary Butyl Alcohol, Phenol, Hydrogen Peroxide, Toluene and various other raw materials used for
manufacturing our products, trading as well as packing.
Purchase of stock-in-trade: Purchase of stock-in trade primarily BHT, Hydroquinone and Catechol.
Changes in inventories of finished goods and work-in-progress and stock-in-trade: Changes in inventories of
finished goods and work-in-progress and stock-in-trade comprises of net increases or decreases in inventory levels
of finished goods, stock-in-trade, and goods which are work-in-progress.
Employee benefit expenses: Employee benefits expense comprise salaries and wages, contributions to provident
fund and gratuity fund, expense on Employee Stock Exchange Option Scheme and staff welfare expenses.
Finance Costs: Our finance costs primarily comprise interest paid on term loans and working capital loans from
banks and financial institutions and other costs incurred in connection with our borrowings.
Depreciation and amortisation expenses: Depreciation and amortisation expenses include depreciation on
tangible assets and amortisation of intangible assets.
Research and development expenses: Research and development expenses comprise of salaries and incentives,
travelling and conveyance expenses, professional fees, laboratory expenses and other related expenses.
Other expenses: Other expenses include consumption of stores and spare parts, power and fuel, rent, repairs and
maintenance of building, insurance, rates and taxes, sub-contracting charges, labour charges, advertisement and
sales promotion, transport and forwarding charges, commission/discount/service charge on sales, traveling and
conveyance, directors sitting fee, auditor’s remuneration, CSR contribution, legal and professional fees, provision
for doubtful debt/advances and bad debts written-off.
88
Results of Operations
The following table sets forth the break-down of our results of operations for the periods indicated:
Particulars
Income
Revenue from operations (gross)
Less: Excise Duty
Revenue from operations (net)
Other income
Total Income
Expenses
Cost of raw materials consumed,
Purchases of stock-in-trade, Changes in
Inventories of finished goods and WIP
and stock-in trade
Cost of raw materials consumed,
Purchases of stock-in-trade, Changes in
Inventories of finished goods and WIP
and stock-in trade as a % of total income
(including packing material consumed)
Employee benefits expense
Employee benefits expense, as a % of
total income
Finance costs
Finance costs, as a % of total income
Depreciation and amortisation expense
Depreciation and amortisation expense,
as a % of total income
Research and development expense
Research and development expense, as a
% of total income
Other expenses
Other expenses, as a % of total income
Total expenses
Total expenses, as a % of total income
Profit before exceptional items and tax
Exceptional item
Profit before tax
Current tax
Prior period Tax Adjustment
MAT credit entitlements
Deferred tax expense /(benefit)
Profit after tax
Add: Share of profit/ loss of Associates
Profit for the period
Fiscal
Fiscal
(Rs. in lakh)
Fiscal
2014
2016
2015
50,422.83
1,488.61
48,934.22
426.89
49,361.11
57,057.68
1,230.23
55,827.45
837.63
56,665.08
51,716.91
849.83
50,867.08
966.38
51,833.46
20,310.07
27,049.64
27,573.53
41.15%
47.74%
53.20%
4,005.21
8.11%
4,058.29
7.16%
3,437.34
6.63%
2,444.25
4.95%
1,705.52
3.46%
2,382.46
4.20%
1,624.62
2.87%
2,465.90
4.76%
1,178.60
2.27%
210.08
0.43%
247.89
0.44%
272.37
0.53%
15,229.41
30.85%
43,904.54
88.95%
5,456.57
(454.73)
5,001.84
987.96
24.71
144.49
262.69
3,582.00
0.37
3,582.37
16,054.35
28.33%
51,417.25
90.74%
5,247.83
35.52
5,283.35
1,053.51
(144.49)
(1,129.81)
5,504.14
(1.41)
5,502.73
13,419.34
25.89%
48,347.08
93.27%
3,486.38
3,486.38
1,066.09
(453.48)
2,873.77
(2.47)
2,871.30
Our Results of Operations
Fiscal 2016 compared to Fiscal 2015
Income
Total Income: Our total income decreased by Rs. 7,303.97 lakh, or 12.89%, from Rs. 56,665.08 lakh in Fiscal
89
2015 to Rs. 49,361.11 lakh in Fiscal 2016. This was primarily due to a decrease in our income from operations.
Revenue from operations (net): Our income from operations (net) decreased by Rs. 6,893.23 lakh, or 12.35%,
from Rs. 55,827.45 lakh in Fiscal 2015 to Rs. 48,934.22 lakh in Fiscal 2016. This was primarily due to lower
realisation from sales due to a reduction in product prices as a result of a fall in crude oil, and lower volumes
which was partially offset by an increase in export benefits.
Other income: Our other income decreased by Rs. 410.74 lakh or 49.04%, from Rs. 837.63 lakh in Fiscal 2015 to
Rs. 426.89 lakh in Fiscal 2016. This decrease was principally due to decrease in income in terms of an agreement
entered into between CFS Europe and a third party.
Expenses
Total expenses: Our total expenses decreased by Rs. 7,512.72 lakh, or 14.61%, from Rs. 51,417.26 lakh in Fiscal
2015 to Rs. 43,904.54 in Fiscal 2016. As a percentage of total income, our total expenses decreased from 90.74%
in Fiscal 2015 to 88.95% in Fiscal 2016.
Cost of raw materials consumed, Purchases of stock-in-trade, Changes in Inventories of finished goods and WIP
and stock-in trade: Our expenses in relation to cost of raw material consumed, purchases of stock-in trade, changes
in inventories of finished goods, work-in-progress and stock-in-trade decreased by Rs. 6,739.57 lakh or 24.92%
from Rs. 27,049.64 lakh in Fiscal 2015 to Rs. 20,310.07 lakh in Fiscal 2016. This decrease was primarily on
account of decrease in raw material cost due to fall in crude prices and the consequent impact thereof on sales
value. As a percentage of total income, expenses in relation to cost of raw materials consumed, purchases of stockin-trade, changes in inventories of finished goods and WIP and stock-in trade decreased from 47.74% in Fiscal
2015 to 41.15% in Fiscal 2016.
Employee benefits expense: Employee benefits expense decreased marginally by Rs. 53.08 lakh, or 1.31%, from
Rs. 4,058.29 lakh in Fiscal 2015 to Rs. 4,005.21 lakh in Fiscal 2016. The overall increase in employee benefits
expense was primarily due to increment paid to employees and addition of new employees. As a percentage of
total income, employee benefits expense increased from 7.16% in Fiscal 2015 to 8.11% in Fiscal 2016.
Finance costs: Our finance costs increased by Rs. 61.79 lakh, or 2.59%, from Rs. 2,382.46 lakh in Fiscal 2015 to
Rs. 2,444.25 lakh in Fiscal 2016. This increase was mainly attributable to increase in working capital borrowings.
Depreciation and amortisation expense: Depreciation and amortisation expenses increased by Rs. 80.90 lakh or
4.98% from Rs. 1,624.62 lakh for Fiscal 2015 to Rs. 1,705.52 lakh for Fiscal 2016. This was primarily on account
of additional capital expenditure incurred at our facilities. Depreciation and amortisation charges represented
3.46% and 2.87% of our total income for Fiscal 2016 and 2015, respectively.
Research and development expense: Research and development expenses decreased by Rs. 37.81 lakh or 15.25%
from Rs. 247.89 lakh in Fiscal 2015 to Rs. 210.08 lakh in Fiscal 2016. This was primarily on account of
capitalisation of development expenses amounting to Rs. 177. 53 lakh. Research and development charges
represented 0.43% and 0.44% of our total income for Fiscal 2016 and 2015, respectively.
Other expenses: Our other expenses decreased by Rs. 824.94 lakh, or 5.14%, from Rs. 16,054.35 lakh in Fiscal
2015 to Rs. 15,229.41 lakh in Fiscal 2016. The overall decrease was principally due to decrease in provisioning
and power and fuel costs. As a percentage of total income, our other expenses increased from 28.33% in Fiscal
2015 to 30.85% in Fiscal 2016.
Exceptional items: Exceptional item of Rs. 454.73 lakh in Fiscal 2016 represents short receipt of settlement
received from the insurance company as a result of a fire which occurred in Fiscal 2014.
Tax expenses: Our tax expense for Fiscal 2016 was Rs. 1,419.85 lakh on a consolidated basis as against the net
tax credit of Rs. 220.79 lakh for Fiscal 2015. The tax benefit during Fiscal 2015 was on account of an extraordinary
tax credit available to CFS Europe S.p.A till Fiscal 2015.
90
Fiscal 2015 compared to Fiscal 2014
Income
Total income: Our total income increased by Rs. 4831.62 lakh, or 9.32%, from Rs. 51,833.46 lakh in Fiscal 2014
to Rs. 56,665.08 lakh in Fiscal 2015. This was primarily due to increase in income from operations.
Income from operations (net): Our income from operations (net) increased by Rs. 4,960.37 lakh, or 9.75%, from
Rs. 50,867.08 lakh in Fiscal 2014 to Rs. 55,827.45 lakh in Fiscal 2015. This increase was primarily due to increase
in sales volumes and export benefits available to our Company.
Other income: Our other income decreased by Rs. 128.73 lakh or 13.32%, from Rs. 966.38 lakh in Fiscal 2014 to
Rs. 837.63 lakh in Fiscal 2015. This decrease was principally due to invoices not raised in terms of an agreement
entered into between CFS Europe and a third party.
Expenses
Total expenses: Our total expenses increased by Rs. 3070.17 lakh, or 6.35%, from Rs. 48,347.08 lakh in Fiscal
2014 to Rs. 51,417.25 lakh in Fiscal 2015. As a percentage of total income, our total expenditure decreased from
93.27% in Fiscal 2014 to 90.74% in Fiscal 2015.
Cost of raw materials consumed, Purchases of stock-in-trade, Changes in Inventories of finished goods and WIP
and stock-in trade: Our expenses in relation to cost of raw material consumed, purchases of stock-in trade, changes
in inventories of finished goods, work-in-progress and stock-in-trade decreased by Rs. 523.89 lakh or 1.90% from
Rs. 27,573.53 lakh in Fiscal 2014 to Rs. 27,049.64 lakh in Fiscal 2015. This marginal decrease was primarily on
account of increased operational efficiencies. As a percentage of total income, expenses in relation to cost of raw
materials, consumed decreased from 53.20% in Fiscal 2014 to 47.74% in Fiscal 2015.
Employee benefits expense: Employee benefits expense increased by Rs. 620.95 lakh, or 18.06%, from Rs.
3,437.34 lakh in Fiscal 2014 to Rs. 4,058.29 lakh in Fiscal 2015. The overall increase in employee benefits expense
was primarily due to increment paid to employees and addition of new employees. As a percentage of total income,
employee benefits expense increased from 6.63% in Fiscal 2014 to 7.16% in Fiscal 2015.
Finance costs: Our finance costs decreased by Rs. 83.44 lakh, or 3.38%, from Rs. 2,465.90 lakh in Fiscal 2014 to
Rs. 2,382.46 lakh in Fiscal 2015. This decrease was mainly attributable to repayment of public deposits to our
investors.
Depreciation and Amortisation expense: Depreciation and amortisation expenses increased by Rs. 446.02 lakh or
37.84% from Rs. 1,178.60 lakh for Fiscal 2014 to Rs. 1,624.62 lakh for Fiscal 2015. This was primarily on account
of additional capital expenditure in plant, equipment and machinery. Depreciation and amortisation charges
represented 2.27% and 2.87% of our total income for Fiscal 2014 and 2015, respectively.
Research and development expense: Research and development expenses decreased by Rs. 24.48 lakh or 8.99%
from Rs. 272.37 lakh in Fiscal 2014 to Rs. 247.89 lakh in Fiscal 2015. This was primarily on account of decrease
in salaries and professional fees. Research and development charges represented 0.53% and 0.44% of our total
income for Fiscal 2014 and 2015, respectively.
Other expenses: Our other expenses increased by Rs. 2,635.01 lakh, or 19.64%, from Rs. 13,419.34 lakh in Fiscal
2014 to Rs. 16,054.35 lakh in Fiscal 2015. The overall increase was principally due to increase in power and fuel,
repairs, sub-contracting charges, advertisement, sales promotion and exchange fluctuation. As a percentage of
total income, our other expenses increased from 25.89% in Fiscal 2014 to 28.33% in Fiscal 2015.
Exceptional items: Exceptional item of Rs. 35.52 lakh in Fiscal 2015 represents the gain on the disposal of
investment by the Company in its subsidiary, Dulcette Technologies LLC. There were no exceptional items for
Fiscal 2014.
91
Tax expense (current tax less deferred tax benefit): Our tax expense for Fiscal 2014 was Rs. 612.61 lakh and a tax
benefit of Rs. 220.79 lac for Fiscal 2015. The decrease in tax expenses was due to increase in deferred tax benefits
from CFS Europe and MAT credit entitlements.
Cash Flows
The table below sets forth our cash flows for the periods indicated:
(In Rs. lakh)
Particulars
Net cash flow from operating activities
Net cash flow used in investing activities
Net cash flow used in financing activities
Net increase / (decrease) in cash and cash equivalents
Fiscal 2016
Fiscal 2015
Fiscal 2014
7157.24
(6,577.87)
(675.92)
(96.55)
4,625.51
(2,628.32)
(1,547.70)
449.49
2,674.23
(3,215.58)
(452.71)
(994.06)
Operating activities
Net cash generated from operating activities was Rs. 7,157.24 lakh (after deducting direct taxes paid of Rs.
1,219.85 lakh) for Fiscal 2016 while our net profit before exceptional & taxation was Rs. 5,456.57 lakh. We had
an operating profit before working capital changes of Rs. 9,891.14 lakh. The difference in net profit before taxation
and operating profit before working capital changes was primarily on account of adjustments made for
depreciation on fixed assets of Rs. 1,705.52 lakh, finance costs of Rs. 2,444.25 lakh, provision of doubtful debts
(net) of Rs. 94.75 lakh, provision for leave encashment of Rs. 127.28 lakh, loss on sale of fixed assets of Rs. 30.11
lakh which were marginally offset by interest/dividend received of Rs. 128.12 lakh, foreign exchange loss of Rs.
169.30 lakh and amortised deferred employee compensation expenses of Rs. 8.52 lakh. Our working capital
adjustments to our cash generated from operating activities for Fiscal 2016 primarily included an increase in
inventories of Rs. 3,690.47 lakh, decrease in trade receivables of Rs. 3673.30 lakh, decrease in trade payables of
Rs. 1267.56 lakh, increase in long term loans and advances of 34.49 lakh, increase in other payables of Rs. 82.73
lakh and increase in other receivables of Rs. 343.54 lakh.
Net cash generated from operating activities was Rs. 4,625.51 lakh (after deducting direct taxes paid of Rs.
1,088.24 lakh) for Fiscal 2015 while our net profit before taxation was Rs. 5,247.83 lakh. We had an operating
profit before working capital changes of Rs. 9,974.09 lakh. The difference in net profit before taxation and
operating profit before working capital changes was primarily on account of adjustments made for depreciation
on fixed assets of Rs. 1,624.62 lakh, interest expenses of Rs. 2,382.46 lakh, provision of doubtful debts (net) of
Rs. 876.93 lakh which were offset by a foreign exchange gain of Rs. 263.16 lakh, profit on sale of fixed assets of
Rs. 47.62 lakh and interest/dividend received of Rs. 142.89 lakh. Our working capital adjustments to our cash
generated from operating activities for Fiscal 2015 primarily included an increase in inventories of Rs. 2,717.67
lakh, increase in trade receivables of Rs. 1,902.29 lakh, increase in trade payables of Rs. 733.75 lakh, decrease in
other payables of Rs. 136.11 lakh.
Net cash generated from operating activities was Rs. 2,674.23 lakh (after deducting direct taxes paid of Rs. 967.20
lakh) for Fiscal 2014 while our net profit before taxation was Rs. 3,486.38 lakh. We had an operating profit
before working capital changes of Rs. 7,514.32 lakh. The difference in net profit before taxation and operating
profit before working capital changes was primarily on account of adjustments made for depreciation on fixed
assets of Rs. 1,178.60 lakh, interest expenses of Rs. 2,465.90 lakh, foreign exchange loss (unrealised)of Rs.
298.80 lakh, amortised deferred employee compensation expenses of Rs. 10.82 lakh, loss on sale of fixed assets
of Rs. 96.23 lakh, provision for doubtful debts (net) of Rs. 61.24 lakh, provision for leave encashment of Rs. 91.87
lakh which were marginally offset by interest/dividend received of Rs.175.52 lakh. Our working capital
adjustments to our cash generated from operating activities for Fiscal 2014 primarily included a decrease in trade
payables of Rs. 5,705.88 lakh, an increase trade receivables of Rs. 1,679.32 lakh, increase in other receivables of
Rs. 810.27 lakh, increase in short term and long term loans and advances of Rs. 92.13 lakh and Rs. 46.12 lakh
respectively, decrease in inventories amounting to Rs. 3,979.51 lakh and increase in other payable amounting to
Rs. 481.32 lakh.
92
Cash flow from investing activities
Net cash used in investing activities was Rs. 6,577.87 lakh for Fiscal 2016, consisting of purchase of fixed assets
of Rs. 6,708.12 lakh which was marginally offset by interest received of Rs. 128.12 lakh and sale of fixed assets
of Rs. 2.13 lakh.
Net cash used in investing activities was Rs. 2,628.32 lakh for the Fiscal 2015, consisting of purchase of fixed
assets of Rs. 2,824.86 lakh and which was marginally offset by interest and dividend received of Rs. 141.78 lakh
and Rs. 0.03 lakh respectively and sale of fixed assets of Rs. 54.73 lakh.
Net cash used in investing activities was Rs. 3,215.58 lakh for the Fiscal 2014, consisting of purchase of fixed
assets of Rs. 3,627.91 lakh and which was partially offset by sale of fixed assets amounting to Rs. 234.50 lakh,
interest and dividend received of Rs. 175.31 lakh and Rs. 0.05 lakh, respectively, and sale of investments
amounting to Rs. 2.47 lakh.
Cash flow from financing activities
Net cash used from financing activities was Rs. 675.92 lakh for Fiscal 2016, consisting of proceeds from
borrowings (net of repayments) of Rs. 2,475.12 lakh, fresh term loan of Rs. 521.00 lakh, proceeds from issue of
share capital of Rs. 270.77 lakh, interest paid of Rs. 2423.37 lakh and receipt of loans and advances of Rs. 10.73
lakh which was partially offset by repayment of term loan amounting to Rs. 955.00 lakh, investment in margin
fixed deposit of 54.38 lakh, dividend and tax on dividend paid amounting to Rs. 432.69 lakh and Rs. 88.10 lakh,
respectively.
Net cash used from financing activities was Rs. 1,547.70 lakh for Fiscal 2015, consisting of interest paid
amounting to Rs. 2,436.82 lakh, dividend paid and tax on dividend of Rs. 335.97 lakh and Rs. 56.65 lakh
respectively which was partially offset by proceeds from borrowings (net of repayments) of Rs. 1,010.76 lakh,
proceeds from issue of share capital of Rs. 134.04 lac, maturity of margin fixed deposit amounting to Rs. 110.21
lakh and movement in loans and advances of Rs. 26.73 lakh.
Net cash used for financing activities was Rs. 452.71 lakh for Fiscal 2014, consisting of interest paid of Rs.
2,432.18 lakh, dividend paid and tax on dividend of Rs. 277.78 lakh and Rs. 47.85 lakh, respectively, which was
partially offset by proceeds from borrowings (net of repayments) of Rs. 2269.40 lakh and proceeds from issue
share capital of Rs. 35.70 lakh.
Indebtedness
Our total consolidated indebtedness as of March 31, 2016, is set out below:
(Rs. in lakh)
Particulars
Fiscal 2016
Short term debt:
- Secured
- Unsecured
Long-term debt (including current maturities)
- Secured
- Unsecured
Total
14,570.49
Nil
3,463.44
Nil
18,033.93
Contingent liabilities and commitments
As at March 31, 2016 we had the following contingent liabilities and commitments:
(Rs. in lakh)
Particulars
Fiscal 2016
Commitments:
- Value of contracts (net of advance) remaining to be executed on capital account not
provided for
93
5.48
Particulars
Fiscal 2016
Contingent liabilities:
- Bills of exchange / cheque discounted with the bankers
- In respect of bank guarantees issued to VAT, excise and customs authorities
- In respect of VAT/CST matter
5,109.82
374.30
732.44
Off-balance sheet arrangements
We do not have any off-balance sheet arrangements or relationships with unconsolidated entities that have been
established for the purpose of facilitating off-balance sheet arrangements.
Interest Service Coverage Ratio
The following table details the Company’s interest coverage ratio as per its standalone financial statements as of
March 31, 2016, 2015 and 2014:
(In Rs. lakh)
Particulars
Fiscal 2016
Fiscal 2015
Fiscal 2014
Profit for the year
2,575.22
2,581.76
1,896.86
Interest Expense*
2,182.93
2,115.11
2,239.53
Interest Coverage Ratio**
2.85
2.69
2.26
*Finance Costs as per Profit & Loss Statement is considered Interest Expense. This will include loan processing charges.
** Interest Coverage Ratio = Profit for the year plus finance costs plus depreciation and amortization divided by finance cost
Quantitative and Qualitative Disclosures about Market Risk
Market risk is the risk of loss related to adverse changes in market prices, including exchange rate risk, interest
rate risk, inflation risk and commodity price risk. We are exposed to exchange rate risk, interest rate risk, inflation
risk and commodity price risk in the normal course of our business.
Exchange Rate Risk
We face exchange rate risk because a significant portion of our revenues, expenditure and certain of our
obligations are denominated in foreign currencies. Some of our assets and liabilities are also denominated in
foreign currencies. While the diversity of our business and operations provides a natural hedge, exchange rate
fluctuations may, in any event, affect the amount of income and expenditure we realize or our ability to service
debt repayments in a foreign currency. See “Risk Factors – Volatility in exchange rate fluctuations may adversely
affect our results of operations.” on page 39.
Interest Rate Risk
Interest rates are highly sensitive to many factors beyond our control, including the monetary policies of the RBI,
deregulation of the financial sector in India, domestic and international economic and political conditions,
inflation and other factors. Upward fluctuations in interest rates increase the cost of servicing existing and new
debts, which adversely affects our results of operations.
Inflation Risk
India has experienced inflation in the past, which has historically contributed to an increase in interest rates,
adversely affecting both our sales and margins.
Commodity Price Risk
As a chemical manufacturer, we are exposed to the risk that prices for raw materials used to manufacture our
products will increase. These materials are linked to global commodities and their prices are cyclical in nature and
fluctuate in accordance with global market conditions. See “Risk Factors – The competitive nature of our markets
may delay or prevent us from passing increases in raw material costs on to our customers. In addition, certain of
our suppliers may be unable to deliver products or raw materials or may withdraw from contractual
arrangements. The occurrence of either event could adversely affect our results of operations.” on page 36.
94
Unusual or Infrequent Events or Transactions
To our knowledge, there have been no transactions or events which, in our judgment, would be considered unusual
or infrequent.
Known Trends or Uncertainties
Our business has been affected and we expect that it will continue to be affected by the trends identified above in
“Significant Factors Affecting Our Results of Operations and Financial Condition” and the uncertainties
described in the section “Risk Factors” on pages 85 and 33, respectively. To our knowledge, except as disclosed
in this Preliminary Placement Document, there are no known factors which we expect to have a material adverse
effect on our income.
Future Relationship between Cost and Revenue
Other than as described in “Risk Factors” and this section, there are no known factors that might affect the future
relationship between cost and revenue.
Competitive Conditions
We expect competition in our industry from existing and potential competitors to intensify. See “Risk Factors”
and “Business” on pages 33 and 71, respectively.
Material developments after March 31, 2016 which could affect future results of operations
1.
As part of our expansion strategy, our subsidiary CFS Mexico recently acquired a 65% shareholding in
Dresen Mexico for a total consideration of USD 7,800,000 with effect from May 4, 2016. Since we acquired
Dresen Mexico after March 31, 2016, the effect of consolidating this entity is not reflected in our
consolidated financial statements included in this Placement Document. The net sales of Dresen Mexico and
its group companies namely Industrias Petrotec de Mexico, S.A. de C.V. Mexico, Nuvel S.A.C. Peru, Britec
S.A. Guatemala, Inovel S.A.S., Colombia and Grinel S.A. Dominican Republic (the “Dresen Group
Companies”) for the financial year ended December 31, 2015, 2014 and 2013 was USD 16,458,369, USD
14,798,867 and USD 14,559,274 respectively. Immediately prior to the Dresen Acquisition, all the Dresen
Group Companies became wholly owned subsidiaries of Dresen Mexico. The fiscal year for Dresen Mexico
commences on January 1 of each year and ends on December 31 of the succeeding year.
This Preliminary Placement Document does not include any pro forma profit and loss statement or balance
sheet prepared in accordance with the laws and regulations of any jurisdiction, which would have shown the
effect our acquisition of 65% shareholding in Dresen Mexico on our historical results of operations and
financial condition, assuming that this acquisition had occurred at the beginning of the relevant reporting
period. Investors are cautioned that they will therefore need to base their assessment on the other information
with respect to the Dresen business and operations included in this Preliminary Placement Document.
2.
CFS Mexico availed a credit facility for an amount of USD 5,850,000 from Exim Bank in April 2016 to
finance the Dresen Acquisition. The details of this loan are as follows:
(a) Rate of Interest: 6 months LIBOR plus 375 basis points payable quarterly;
(b) Repayment Schedule: To be repaid in 24 quarterly instalments commencing 24 months from the date
of first disbursement which is April 2016;
(c) Security: (i) Pledge of 100 percent of the equity shares held by our Company in CFS Mexico, (ii) pledge
of the entire 65% shareholding of CFS Mexico in Dresen Mexico and Dresen Group Companies; and
(iii) corporate guarantee by our Company; and
95
(d) Liquidated damages (in case of default): 2% over and above the applicable interest rate, payable in
case of default in payment of principal, interest or any other monies on the respective due dates.
3.
We have incorporated a subsidiary in Shanghai, namely CFS China for trading in products of our Company.
We are yet to capitalise CFS China.
Changes in accounting policies during last three years and their effect on the profits and reserves of the
Company
There are no changes in accounting policies during last three years.
96
REGULATIONS AND POLICIES
The following description is a summary of certain sector specific laws and regulations in India that are applicable
to our business. The information detailed below has been obtained from various legislations, including rules,
regulations and bylaws that are available in the public domain. The regulations set out below may not be
exhaustive and are merely intended to provide general information to the investors and are neither designed nor
intended to substitute for professional legal advice. The statements below are based on the current provisions of
Indian law, which are subject to change or modification by subsequent legislative, regulatory, administrative or
judicial decisions.
The Food Safety and Standards Act, 2006 (“FSSA”) and the Food Safety and Standards Rules, 2011 (“FSS
Rules”)
The FSSA provides for the establishment of the “Food Safety and Standards Authority of India” (the “Food
Authority”), which establishes food safety standards for the manufacture, storage, distribution, sale and import
of food. It is also required to provide scientific advice and technical support to the Government of India and Indian
state governments in framing the policy and rules relating to food safety and nutrition. The FSSA also sets forth
requirements relating to the license and registration of food businesses, general principles for food safety,
responsibilities of food business operators and liability of manufacturers and sellers, and provides for adjudication
of such issues by the Food Safety Appellate Tribunal. In exercise of powers under the FSSA, the Food Authority
has framed FSS Rules. The FSS Rules provides the procedure for registration and licensing process for food
business and lays down detailed standards for various food products. The FSSR also sets out the enforcement
structure of ‘commissioner of food safety’, ‘food safety officer’ and ‘food analyst’ and procedures of taking
extracts, seizure, sampling and analysis. The Food Authority has also framed various food safety and standards
regulations in relation to various food products and additives.
The Legal Metrology Act, 2009
The Legal Metrology Act 2009 (“Legal Metrology Act”) replaces the Standard Weights and Measures Act, 1976.
The Legal Metrology Act seeks to establish and enforce standards of weights and measures, regulate trade and
commerce in weights, measures and other goods which are sold or distributed by weight, measure or number and
for matters connected therewith or incidental thereto. The key features of the Legal Metrology Act are (a)
appointment of Government approved test centres for verification of weights and measures; (b) allowing the
companies to nominate a person who will be held responsible for breach of provisions of the Legal Metrology
Act; and (c) more stringent punishment for violation of provisions.
Bureau of Indian Standards Act, 1986
The Bureau of Indian Standards Act, 1986 (“BIS”) provides for the establishment of bureau for the
standardisation, marking and quality certification of goods. The BIS provides for the functions of the bureau which
include, among others (a) recognise as an Indian standard, any standard established for any article or process by
any other institution in India or elsewhere; (b) specify a standard mark to be called the Bureau of Indian Standards
Certification Mark to represent a particular Indian standard; and (c) make such inspection and take such samples
of any material or substance as may be necessary to see whether any article or process in relation to which the
standard mark has been used conforms to the Indian standard or whether the standard mark has been improperly
used in relation to any article or process with or without a license.
Narcotic Drugs and Psychotropic Substances Act, 1985
The Narcotic Drugs and Psychotropic Substances Act, 1985 (“NDPS”) makes stringent provisions for the control
and regulation of operations relating to narcotic drugs and psychotropic substances, to provide for the forfeiture
of property derived from, or used in, illicit traffic of narcotic drugs and psychotropic substances and to implement
the provisions of the International Convention on Narcotic Drugs and Psychotropic Substances. The NDPS
authorises the Central Government to take all such measures as it deems necessary or expedient for the purpose
of preventing and combating abuse of narcotic drugs and psychotropic substances. The NDPS prohibits the
production, manufacture, possession, sale, purchase, transportation, warehousing, usage, consumption, import or
export of any narcotic drug or psychotropic substance, except for medical or scientific purposes as provided.
The Narcotic Drugs and Psychotropic Substances (Amendment) Act, 2014 (“Amendment”) broaden the object
of the NDPS from containing illicit use to also promoting the medical and scientific use of narcotic drugs and
97
psychotropic substances. Further, they allow for management of drug dependence, thereby legitimising opioid
substitution, maintenance and other harm reduction services. The Amendment allows for instituting evidence
based and human rights compliant standards for drug treatment facilities, whether public or private, significantly
impacting the health and rights of people who use drugs.
Poisons Act, 1919
The Poisons Act, 1919 restricts the use of poisons. It empowers the Central Government to prohibit the importation
into India across any customs frontier defined by the Central Government of any specified poison and regulates
the grant of licenses.
Environmental laws
The three major statutes in India, which regulate and protect the environment against pollution are the
Environment Protection Act, 1986, as amended, the Water (Prevention and Control of Pollution) Act, 1974, as
amended (the “Water Act”) and the Air (Prevention and Control of Pollution) Act, 1981, as amended (the “Air
Act”). The basic purpose of these statutes is to control, abate and prevent pollution. In order to achieve these
objectives, Pollution Control Boards (“PCBs”), which are vested with diverse powers to deal with water and air
pollution, have been established at the Central level and in each State. The PCBs are responsible for setting the
standards for maintenance of clean air and water, directing the installation of pollution control devices in industries
and undertaking investigations to ensure that industries are functioning in compliance with the standards
prescribed. All industries and factories are required to obtain consent orders from the PCBs, which are indicative
of the fact that the factory or industry in question is functioning in compliance with the pollution control norms
laid down. These are required to be renewed periodically. The Air Act lays down the limits with regard to
emissions and pollutants that are a direct result of any operation or activity. The Water Act was enacted to provide
for the prevention and control of water pollution by factories and manufacturing industries and for maintaining or
restoring the wholesomeness of water. The Water (Prevention and Control of Pollution) Cess Act, 1977, as
amended, provides for the levy and collection of a cess on local authorities and industries based on the
consumption of water by such local authorities and industries so as to enable implementation of the Water Act by
the regulatory agencies concerned.
In addition to the above, our Company is also required to comply at all times with the provisions of various other
environmental laws, rules and regulations including the Hazardous Wastes (Management, Handling and
Transboundary Movement) Rules, 2008, the Maharashtra Factories (Control of Industrial Major Accident
Hazards) Rules, 2003, the Manufacture, Storage and Import of Hazardous Chemicals Rules, 1989, the Chemical
Accidents (Emergency Planning Preparedness and Response) Rules, 1996, the Bio-Medical Waste (Management
and Handling) Rules, 1998.
The Public Liability Insurance Act, 1991
The Public Liability Insurance Act, 1991 (the “PLI Act”) imposes liability on the owner or controller of hazardous
substances for any damage arising out of an accident involving such hazardous substances. A list of hazardous
substances covered by the legislation has been enumerated by the government by way of a notification. Under the
law, the owner or handler is also required to take out an insurance policy insuring against liability. The rules made
under the PLI Act mandate that the employer has to contribute towards the Environmental Relief Fund a sum
equal to the premium paid on the insurance policies.
Intellectual Property Legislations
Intellectual property in India enjoys protection under both common law and statute. Under statute, India provides
for the patent protection under the Patents Act, 1970, as amended (the “Patents Act”). The Patents Act governs
the patent regime in India and recognises process patents as well as product patents. The form and manner of
application for patents is set out under Chapter III and Chapter VIII deals with the grant of patents. Patents
obtained in India are valid for a period of 20 years from the date of filing the application. In addition to broad
requirement that an invention satisfy the requirements of novelty, utility and non-obviousness in order for it to
avail patent protection, the Patents Act further provides that patent protection may not be granted to certain
specified types of inventions and materials even if they satisfy the above criteria.
Trademark protection is provided under the Trade Marks Act, 1999, as amended (the “Trade Marks Act”). The
purpose of the Trademarks Act is to grant exclusive rights to marks such as a brand, label, heading and to obtain
98
relief in case of infringement for commercial purposes as a trade description. It prohibits registration of
deceptively similar trademarks and provides for penalties for infringement, falsifying and falsely applying
trademarks. Once a mark it registered, it is valid in India only, for a period of ten years and can be renewed from
time to time in perpetuity. In India, trademarks enjoy protection under both statutory and common law. Indian
trademark law permits the registration of trademarks for goods and services. Certification marks and collective
marks can also be registered under the Trademarks Act. Trademarks are granted to marks capable of being
represented graphically and which are capable of distinguishing the goods or services of one person from those of
others. While both registered and unregistered trademarks are protected under Indian law, the registration of
trademarks offers significant advantages to the registered owner. Registered trademarks may be protected by
means of an action for infringement and unregistered trademarks may only be protected by means of the common
law remedy of passing off.
In May 2016, the cabinet of the Government of India has approved the Intellectual Property Rights Policy, which
makes the Department of Industrial Promotion and Policy the agency in charge of regulating intellectual property
rights in the country. The Intellectual Property Rights Policy is aimed at simplifying and speeding up the process
of registration.
Factories Act, 1948
The Factories Act, 1948, as amended (the “Factories Act”), defines a ‘factory’ to cover any premises which
employs ten or more workers and in which manufacturing process is carried on with the aid of power and covers
any premises where there are at least 20 workers who may or may not be engaged in an electrically aided
manufacturing process. Each State Government has rules in respect of the prior submission of plans and their
approval for the establishment of factories and registration and licensing of factories. The Factories Act provides
that the ‘occupier’ of a factory (defined as the person who has ultimate control over the affairs of the factory and
in the case of a company, any one of the directors) shall ensure the health, safety and welfare of all workers while
they are at work in the factory, especially in respect of safety and proper maintenance of the factory such that it
does not pose health risks, the safe use, handling, storage and transport of factory articles and substances, provision
of adequate instruction, training and supervision to ensure workers’ health and safety, cleanliness and safe working
conditions. If there is a contravention of any of the provisions of the Factories Act or the rules framed thereunder,
the occupier and manager of the factory may be punished with imprisonment or with a fine or with both.
Shops and establishments legislation
The provisions of shops and establishments legislations, as may be applicable in a state in which establishments
are set up, regulate the conditions of work and employment and generally prescribe obligations in respect of inter
alia registration, opening and closing hours, daily and weekly working hours, holidays, leave, health and safety
measures and wages for overtime work. The Bombay Shops and Establishments Act, 1948, as amended, is
applicable to shops and commercial establishments in Maharashtra.
Labour laws
We are subject to various labour laws for the safety, protection, condition of working, employment terms and
welfare of labourers and/or employees of our Company. The Industrial Disputes Act, 1947, as amended, provides
for statutory mechanism of settlement of all industrial disputes, a term which primarily refers to a dispute or
difference between employers and workmen concerning employment or the terms of employment or with the
conditions of labour of any person. In our manufacturing facilities, our Company uses the services of certain
licensed contractors who in turn employ contract labour whose number exceeds 20 in respect of each facility.
Accordingly, our Company is regulated by the provisions of the Contract Labour (Regulation and Abolition) Act,
1970, as amended (the “CLRA Act”), and the rules framed thereunder which requires our Company to be
registered as a principal employer and prescribes certain obligations with respect to welfare and health of contract
labour. The CLRA Act imposes certain obligations on the contractor in relation to establishment of canteens, rest
rooms, drinking water, washing facilities, first aid, other facilities and payment of wages. However, in the event
the contractor fails to provide these amenities, the principal employer is under an obligation to provide these
facilities within a prescribed time period. Penalties, including both fines and imprisonment, may be levied for
contravention of the provisions of the CLRA Act.
Our Company is subject to other laws concerning condition of working, benefit and welfare of our labourers and
employees such as the Industrial Employment (Standing Orders) Act, 1946, as amended, the Public Liability
Insurance Act, 1991, as amended, the Employees State Insurance Act 1948, as amended, the Employees
99
(Provident Fund and Miscellaneous Provisions) Act, 1952, as amended, the Trade Union Act, 1926, as amended,
the Payment of Gratuity Act, 1972, as amended, the Payment of Bonus Act, 1965, as amended, the Minimum
Wages Act, 1948, as amended, the Payment of Wages Act, 1936, as amended and the Equal Remuneration Act,
1976, as amended.
Importer Exporter Code
The main objective of the Foreign Trade (Development and Regulation) Act, 1992 as amended (the “FTDR Act”),
is to develop and regulate foreign trade by facilitating imports into India and augmenting exports from India.
Under the FTDR Act, an importer- exporter code (“IEC”) granted by the Director General of Foreign Trade is
required to be obtained in the event any import or export of the product is envisaged. Failure to obtain the IEC
number shall attract penalty under the FTDR Act.
Other laws
In addition to the above, our Company is also required to comply with the provisions of the Companies Act and
rules framed thereunder and other applicable statutes imposed by the Centre or the State Government and
authorities for our day-to-day business and operations. Our Company is also amenable to various central and state
tax laws.
100
BOARD OF DIRECTORS AND SENIOR MANAGEMENT
Board of Directors
The general supervision, direction and management of our Company, its operations and business are vested in the
Board, which exercises its power subject to the Memorandum of Association and Articles of Association of our
Company and the requirements of the applicable laws. The Articles of Association set out that the number of
Directors in our Company shall be not less than three and not more than 15.
The composition of the Board is in conformity with section 149 of the Companies Act, 2013 and Regulation 17
of the Listing Regulation. As on date our Company has 12 Directors. Out of the 12 Directors, three are Executive
Directors including one woman Director, three are Non-Executive Director, and six are Independent Directors.
The following table sets forth details regarding the Board at the date of this Preliminary Placement Document:
Name, Occupation, Term
and Nationality
Dilip D. Dandekar
Director
Identification
Number
00846901
Age
Position
64
Chairman and NonExecutive Director
53
Managing Director
01077379
Flat
No.9,
Concord
Apartment, Bullock Road,
Bandra (W), Mumbai – 400
050
47
Executive Director
01748510
13S, Regency Terrace, Flat
no.504,
17th
Road,
Chitrakar Dhurandar Marg,
Khar (West), Mumbai 400
052
64
Executive Director
and Chief Financial
Officer
02909122
Flat no. 6, Amber Palace
Apartment,
Chittaranjan
Road, Vile Parle (East),
Mumbai 400 057
49
Non-Executive
Director
01641934
Horizon View, Flat no. 5,
Gen. J. Bhonsle Marg,
Mumbai 400 021
Occupation: Industrialist
Address
6, Govind Sadan, Shivaji
Park Road no. 4, Dadar,
Mumbai 400 028
Term: Liable to retire by
rotation
Nationality: Indian
Ashish Dandekar
Occupation: Business
Term: Three years with
effect from August 1, 2015
Nationality: Indian
Leena Dandekar
Occupation: Business
Term: Three years from
July 1, 2014
Nationality: Indian
Dattatraya R. Puranik
Occupation: Service
Term: Two years from
August 1, 2014
Nationality: India
Nirmal V. Momaya
Occupation: Business
Term: Liable to retire by
rotation
Nationality: Indian
101
Name, Occupation, Term
and Nationality
Ajit Deshmukh
Age
Position
Director
Identification
Number
00203706
Address
47
Non-Executive
Director
77
Independent
Director
01972457
401 Vaishali Apartment,
15/21 Janki Kutir, Juhu,
Mumbai 400 049
77
Independent
Director
00003640
161/A,
Twin Towers,
V.S.Road,
Prabhadevi,
Mumbai 400 025
51
Independent
Director
00264422
41, Mereweather Road,
Jaiji Mansion, Ground
Floor, Mumbai 400 039
52
Independent
Director
00318051
Nariman Building, First
Floor, 136, Maharshi Karve
Road, opposite Cooperage
Bus, Mumbai 400 020
52
Independent
Director
00171022
32 Cherrysons, 143-144 St.
Cyril Road, Bandra (West),
Mumbai 400 050
51
Independent
Director
06904583
Via Italo Panattoni N.93,
Rome 00189, Italy
Occupation: Business
Sammarth Krupa, Ram
Mandir Road, Vile-Parle
(East), Mumbai 400 057
Term: Liable to retire by
rotation
Nationality: Indian
Pramod M. Sapre
Occupation: Consultant
Term: Five years from
August 4, 2014
Nationality: Indian
Sharad M. Kulkarni
Occupation: Business
Term: Five years from
August 4, 2014
Nationality: Indian
Abeezar E. Faizullabhoy
Occupation: Solicitor
Term: Five years
August 4, 2014
from
Nationality: Indian
Bhargav Patel
Occupation: Business
Term: Five years from
August 4, 2014
Nationality: Indian
Atul R. Pradhan
Occupation: Consultant
Term: Two years till the
23rd annual general meeting
Nationality: Indian
Nicola Paglietti
Occupation: Solicitor
Term: Two years till the 23rd
annual general meeting
Nationality: Italian
102
Compensation of Directors
The Nomination and Remuneration Committee determines and recommends to the Board the compensation to
Directors. The Board of Directors or the shareholders, as the case may be, approve the compensation to Directors.
The table below sets forth the details of the remuneration (including sitting fees, salaries, arrears, commission and
perquisites) of the existing Directors for the last three Financial Years:
(in Rs. lakh)
From April 1,
Name
2016 to May
Fiscal 2016
Fiscal 2015
Fiscal 2014
31, 2016
Dilip D. Dandekar
7.45
36.65
33.67
21.98
Ashish Dandekar
71.86
190.45
176.88
165.68
Leena Dandekar
9.59
82.55
62.85
Dattatraya R. Puranik
22.39
66.28
61.28
49.91
Nirmal V. Momaya
6.50
9.50
4.90
Ajit Deshmukh
9.50
4.90
Pramod M. Sapre
8.20
14.45
10.08
9.30
Sharad M. Kulkarni
8.00
15.25
7.65
9.00
Abeezar E. Faizullabhoy
6.00
15.95
8.27
8.62
Bhargav Patel
8.25
15.75
7.32
8.72
Atul R. Pradhan
6.50
9.75
5.40
Nicola Paglietti
8.75
4.90
Terms and Conditions of employment of Executive Directors
Ashish S. Dandekar
Pursuant to the resolution of the Shareholders’ dated August 5, 2015 and agreement dated August 6, 2015 executed
between our Company and Ashish S. Dandekar, the remuneration payable to Ashish S. Dandekar from August 1,
2015 to July 31, 2018 is as mentioned below:
Sr. No.
1.
2.
3.
Category
Salary
Perquisites
Commission
Remuneration
Rs. 7.81 lakhs per month (entitled to annual increment).
Provident Fund, family pension scheme, superannuation fund, gratuity,
encashment of leave including reimbursement of expenses/ allowances
for utilities such as rent, gas, electricity, medical reimbursement, leave
travel concession, communication facilities, keyman insurance policies,
benefit of personal accident insurance scheme.
To be calculated with reference to the net profit of the Company for a
particular Fiscal, subject to compliance with the Companies Act, 2013.
Leena Dandekar
Pursuant to the resolution of the Shareholders’ dated June 30, 2014 and agreement dated July 1, 2014 executed
between our Company and Leena Dandekar, the remuneration payable to Leena Dandekar from July 1, 2014 to
June 30, 2017 is as mentioned below:
Sr. No.
1.
2.
3.
Category
Salary
Perquisites
Commission
Remuneration
Rs. 4.40 lakhs per month (entitled to annual increment).
Rs. 20.70 lakh per annum and house rent allowance, electricity, water,
furnishings and repairs, medical reimbursement, leave travel concession,
club fees, provision of car with driver, telephone/mobile communication
facilities, personal accident insurance.
To be calculated with reference to the net profit of the Company for a
particular Fiscal, subject to compliance with the Companies Act, 2013.
103
Dattatraya R. Puranik
Pursuant to the resolution of the Shareholders’ dated August 4, 2014 and agreement dated August 1, 2014 executed
between our Company and Dattatraya R. Puranik, the remuneration payable to Dattatraya R. Puranik from August
1, 2014 to July 31, 2016 is as mentioned below:
Sr.
Category
Remuneration
No.
1.
Salary
Rs. 1.69 lakh per month (entitled to annual increment).
2.
Perquisites
Rs. 28.00 lakh and house rent allowance, electricity, water, furnishings
and repairs, medical reimbursement, leave travel concession, club fees,
provision of car with driver, telephone/mobile communication
facilities, personal accident insurance.
3.
Commission
To be calculated with reference to the net profit of the Company for a
particular Fiscal, subject to compliance with the Companies Act, 2013.
Relationship with other Directors
Dilip D.Dandekar is the paternal uncle of Ashish S. Dandekar. None of the other Directors on the Board are related
to each other.
Borrowing powers of the Board
Our Company has, pursuant to a special resolution dated June 30, 2014, passed under section 180(1) (c) of
Companies Act, 2013, authorised the Board of Directors to borrow, from time to time, such sum of monies which
together with monies already borrowed by our Company (other than temporary loan obtained in ordinary course
of business) may exceed the aggregate paid-up capital and free reserves of the Company, provided that the total
amount so borrowed by the Board shall not exceed Rs. 750 lakhs.
Interest of Directors
All of the Directors, other than the Executive Directors, may be deemed to be interested to the extent of fees
payable to them for attending Board or Board committee meetings and commission as well as to the extent of
reimbursement of expenses payable to them. The Executive Directors may be deemed to be interested to the extent
of remuneration paid to him for services rendered as the officer of our Company.
Our Directors may also be regarded as interested in the Equity Shares held by them, if any, or that may be
subscribed by or allotted to their relatives or the companies, firms or trusts, in which they are interested as
directors, members, partners, trustees or promoters. Our Directors may also be deemed to be interested to the
extent of any dividend payable to them and other distributions in respect of the said Equity Shares.
Except as disclosed in this Preliminary Placement Document, and except to the extent of shareholding in our
Company, our Directors do not have any financial or other material interest in the Issue and there is no effect of
such interest in so far as it is different from the interests of other persons.
For details relating to contracts, agreements or arrangements entered into by our Company during the last three
Fiscals, in which the Directors are interested directly or indirectly and for payments made to them in respect of
such contracts, agreements or arrangements and for other interest of Directors in respect to other related party
transactions, see “Financial Information” on page 157.
As of March 31, 2016, there were no outstanding transactions other than in the ordinary course of business
undertaken by our Company in which the Directors were interested parties.
Except as otherwise stated in this Preliminary Placement Document, our Company has not entered into any
contract, agreement or arrangement during the preceding two years from the date of this Preliminary Placement
Document in which any of the Directors are interested, directly or indirectly, and no payments have been made to
them in respect of any such contracts, agreements, arrangements which are proposed to be made with them.
Further, as on March 31, 2016, no Director has taken any loans from our Company.
104
Bonus or profit sharing plan of the Directors
The Company does not have any bonus or profit sharing plan with the Directors.
Shareholding of Directors
As at March 31, 2016, our Directors held the following number of the Equity Shares:
Number of Equity
Shares held
1,36,31,000(1)
36,96,495
36,01,520
14,27,120
1,84,990
1,61,400
1,58,000
1,53,223
1,50,000
40(2)
Names of Directors
Ashish S. Dandekar
Leena Dandekar
Nirmal V. Momaya
Dilip D. Dandekar
Pramod M. Sapre
Sharad M. Kulkarni
Abeezar E. Faizullabhoy
Dattatraya R. Puranik
Bhargav Patel
Ajit Deshmukh
(1)
13,05,600 Equity Shares jointly held with Rajani Dandekar
20 Equity Shares jointly held with Sonali Deshmukh
(2)
Corporate Governance
Our Company has in place processes and systems whereby it complies with the requirements to the corporate
governance provided under Listing Regulations. The corporate governance framework is based on an effective
independent Board, separation of the supervisory role of the Board from the executive management team and
constitution of the committees of the Board, as required under applicable law.
Our Company believes that its Board is constituted in compliance with the Companies Act, 2013 and the Listing
Regulations. The Board functions either as a full Board or through various committees constituted to oversee
specific operational areas.
Committees of Board of Directors
1.
Audit Committee
Audit Committee was last reconstituted on January 8, 2009. The terms of reference of this committee
were last amended on May 29, 2014. The Audit Committee comprises of four members: Sharad M.
Kulkarni, Pramod M. Sapre, Abeezar E. Faizullabhoy, Bhargav Patel. Sharad M. Kulkarni is the
Chairman of the Audit Committee.
2.
Stakeholders Relationship Committee (“SRC”)
SRC was last constituted on May 29, 2014. The terms of reference of this committee were last amended
on May 29, 2014. The SRC comprises of three members: Abeezar E. Faizullabhoy, Dilip D. Dandekar,
Ashish S. Dandekar. Abeezar E. Faizullabhoy is the chairman of the SRC.
3.
Nomination and Remuneration Committee (“NRC”)
NRC was last reconstituted on May 12, 2014. The terms of reference of this committee were last amended
on May 12, 2014. NRC comprises of four members: Pramod M. Sapre, Sharad M. Kulkarni, Abeezar E.
Faizullabhoy, Bhargav Patel. Pramod M. Sapre is the chairman of the NRC.
Our Company shall amend the terms of reference of the above mentioned Committees of Board of Directors in
terms of the Listing Regulations, wherever applicable, in the next meeting of the Board of Directors.
105
Key managerial personnel
Our operations are overseen by a professional management team. The following are the key managerial personnel
of the Company, in addition to our Company’s Managing Director and Executive Directors, in terms of the
Companies Act:
Dattatraya R. Puranik, Chief Financial Officer
Dattatraya R. Puranik is the Chief Financial Officer of our Company. He is also an Executive Director of our
Company. For further details, see “Board of Directors and Senior Management – Board of Directors”.
Rahul Sawale, Company Secretary
Rahul Sawale is the Group Company Secretary of our Company. He is an associate member of the Institute of
Company Secretaries of India.
Bonus or profit sharing plan of the key managerial personnel
The Company does not have any bonus or profit sharing plan with the key managerial personnel.
Interest of key managerial personnel
None of our key managerial personnel has been paid any consideration of any nature from our Company, other
than their remuneration. Except to the interest of their shareholding in the Company, our key managerial personnel
do not have any financial or other material interest in the Issue and there is no effect of such interest in so far as
it is different from the interest of other persons.
Payment or Benefit to Officers of our Company
Except statutory benefits upon termination of their employment in our Company or superannuation, no officer of
our Company is entitled to any other benefit upon termination of his/her employment in our Company.
Shareholding of our Company’s key managerial personnel
As at March 31, 2016, key managerial personnel of the Company holding Equity Shares in the Company are as
mentioned below:
Sl. No.
1.
2.
3.
(1)
Name of the Key Managerial Personnel
Dattatraya R. Puranik
Ashish S. Dandekar
Leena Dandekar
No. of Shares held by them
1,53,223
1,36,31,000(1)
36,96,495
13,05,600 Equity Shares jointly held with Rajani Dandekar
Other Confirmations
Except to the extent of shareholding of the Promoters in the Company, none of the Promoters of our Company
has any financial or other material interest in the Issue and there is no effect of such interest in so far as it is
different from the interests of other persons.
Related Party Transactions
For details in relation to the related party transactions entered by our Company during the last three Financial
Years, as per the requirements under “Accounting Standard 18 – Related Party Transactions” specified under the
Companies Act, 2013, see “Financial Information” on page 157.
Employee Stock Option Schemes
Our Company has formulated three employee stock option schemes namely (“ESOP Schemes”); (i) Camlin Fine
Sciences Employees Stock Option Scheme, 2008 (“ESOP 2008”) pursuant to a special resolution passed by the
shareholders of the Company on August 8, 2008; (ii) Camlin Fine Sciences Employees Stock Option Scheme,
106
2012 (“ESOP 2012”) pursuant to a special resolution passed by the shareholders of the Company on August 1,
2012; and (iii) Camlin Fine Sciences Employees Stock Option Scheme, 2014 (“ESOP 2014”) pursuant to a special
resolution passed by the shareholders of the Company on August 4, 2014. The purpose of the ESOP Schemes is
to provide the employees with an additional incentive in the form of options to receive the Equity Shares of the
Company at a future date. The ESOPs are aimed to reward employees of our Company for their continuous hard
work, dedication and support.
All options have been granted, vested, exercised or lapsed/forfeited under ESOP 2008 and ESOP 2012.
Details with respect to ESOP 2014 as at March 31, 2016 are provided in the table below:
Sl. No.
1.
2.
3.
4.
5.
6.
7.
Particulars
Total number of options outstanding at the beginning of the
year
Total number of options granted under ESOP 2014 during
the year
Options vested during the year
Options exercised during the year
Options lapsed or forfeited during the year
Total number of options outstanding at the end of the year
Total number of options available for grant
107
Number of
Equity Shares/ Options
16,21,000
335,500
12,85,500
NIL
PRINCIPAL SHAREHOLDERS AND OTHER INFORMATION
The following table presents information regarding the ownership of Equity Shares by the Shareholders as of
March 31, 2016:
Summary statement holding of Equity Shares
Category of
shareholder
(A) Promoter &
Promoter Group
(B) Public
(C1) Shares
underlying DRs
(C2) Shares held
by Employee Trust
(C) Non PromoterNon Public
Grand Total
Nos. of
sharehold
ers
No. of fully paid up
equity shares held
Total nos.
shares held
12
3,85,07,789
3,85,07,789
26,896
5,81,58,041
5,81,58,041
Shareholding as a % of
total no. of shares
(calculated as per
SCRR, 1957)As a % of
(A+B+C2)
39.84
Number of equity
shares held in
dematerialised form
3,85,07,789
60.16
0.00
5,55,55,331
0.00
0.00
26,908
9,66,65,830
9,66,65,830
100.00
9,40,63,120
Statement showing shareholding pattern of the Promoter and Promoter Group
Category of
shareholder
A1) Indian
Individuals/Hindu
undivided Family
Vivek A. Dandekar
Subhash Digambar
Dandekar
S D Dandekar (HUF)
Rajani Subhash
Dandekar
Leena Ashish
Dandekar
D P Dandekar (HUF)
Ashish Subhash
Dandekar
Abha A. Dandekar
Any Other (specify)
Vibha Agencies Pvt.
Ltd.
Camart Agencies Ltd
Cafco Consultants
Limited
Sub Total A1
A2) Foreign
Individuals
(NonResident
Individuals/ Foreign
Individuals)
Anagha S. Dandekar
Sub Total A2
A=A1+A2
3,13,20,169
3,13,20,169
Shareholding as a %
of total no. of shares
(calculated as per
SCRR, 1957)As a %
of (A+B+C2)
0.00
32.40
55,73,937
8,48,000
55,73,937
8,48,000
5.77
0.88
55,73,937
8,48,000
9,68,000
5,24,800
9,68,000
5,24,800
1.00
0.54
9,68,000
5,24,800
36,96,495
36,96,495
3.82
36,96,495
5,04,000
1,36,31,000
5,04,000
1,36,31,000
0.52
14.10
5,04,000
1,36,31,000
3
1
55,73,937
60,14,820
26,06,340
55,73,937
60,14,820
26,06,340
5.77
6.22
2.70
55,73,937
60,14,820
26,06,340
1
1
26,59,680
7,48,800
26,59,680
7,48,800
2.75
0.77
26,59,680
7,48,800
11
3,73,34,989
3,73,34,989
3,73,34,989
1
11,72,800
11,72,800
38.62
0.00
1.21
1
12
11,72,800
11,72,800
3,85,07,789
11,72,800
11,72,800
3,85,07,789
1.21
1.21
39.84
11,72,800
11,72,800
3,85,07,789
Nos. of
shareholders
8
No. of fully paid
up equity
shares held
108
Total nos.
shares held
Number of
equity shares
held in
dematerialised
form
3,13,20,169
11,72,800
Statement showing shareholding pattern of the Public shareholder
Category & Name of
the Shareholders
0
4
4
0
6,67,635
35,49,207
6,67,635
35,49,207
Shareholding %
calculated as per
SCRR, 1957 As a %
of (A+B+C2)
0.00
0.69
3.67
8
1,09,180
1,09,180
0.11
1,06,180
16
0
43,26,022
0
43,26,022
4.48
0.00
43,23,022
0
25,818
0
2,93,09,719
2,93,09,719
0.00
30.32
2,67,23,159
8
1,55,33,147
1,55,33,147
16.07
1,55,33,147
0
34,42,027
34,42,027
3.56
34,42,027
0
0
0
0
0
0
0
1054
26,880
26,896
10,14,000
11,29,600
11,29,600
11,29,600
14,27,120
26,59,680
36,01,520
89,89,153
5,38,32,019
58,158,041
10,14,000
11,29,600
11,29,600
11,29,600
14,27,120
26,59,680
36,01,520
89,89,153
5,38,32,019
5,81,58,041
1.05
1.17
1.17
1.17
1.48
2.75
3.73
9.30
55.69
60.16
10,14,000
11,29,600
11,29,600
11,29,600
14,27,120
26,59,680
36,01,520
89,76,003
5,12,32,309
5,55,55,331
No. of fully
paid up equity
shares held
No. of
shareholder
B1) Institutions
Mutual Funds/
Foreign Portfolio
Investors
Financial Institutions/
Banks
Sub Total B1
B2) Central Government/
State Government(s)/
President of India
B3) Non-Institutions
Individual share capital
upto Rs. 2 Lacs
Individual share capital
in excess of Rs. 2 Lacs
India Capital Fund
limited
Urjita J. Master
Aditi Dilip Dandekar
Ketki Amit Sawant
Rahul D. Dandekar
Dilip D. Dandekar
Camart Agencies Ltd
Nirmal V. Momaya
Any Other (specify)
Sub Total B3
B=B1+B2+B3
Total no.
shares held
Number of equity
shares held in
dematerialised
form(Not Applicable)
6,67,635
35,49,207
Statement showing shareholding pattern of the Non Promoter- Non Public shareholder
Category &
Name of the
Shareholders(I)
No. of
shareholder(
III)
C1) Custodian/DR
Holder
C2) Employee
Benefit Trust
0
No. of fully
paid up equity
shares
held(IV)
0
0
Total no. shares
held(VII =
IV+V+VI)
Shareholding %
calculated as per
SCRR, 1957 As a % of
(A+B+C2)(VIII)
0.00
0
Number of equity shares
held in dematerialised
form(XIV)(Not
Applicable)
0.00
Details of disclosure made by the Trading Members holding 1% or more of the Total No. of shares of the
company
Sl. No.
-
Name of the Trading
Member
Name of the Beneficial
Owner
No. of shares
held
% of total no. of
shares
Date of reporting by the
Trading Member
NIL
NIL
NIL
NIL
NIL
109
ISSUE PROCEDURE
Below is a summary intended to present a general outline of the procedure relating to the bidding, payment,
Allocation and Allotment of the Equity Shares. The procedure followed in this Issue may differ from the one
mentioned below and the prospective investors are assumed to have appraised themselves of the same from our
Company or the BRLM.
The prospective investors are advised to inform themselves of any restrictions or limitations that may be
applicable to them. Investors that apply in the Issue will be required to confirm and will be deemed to have
represented to our Company, the BRLM and their respective directors, officers, agents, affiliates and
representatives that they are eligible under all applicable laws, rules, regulations, guidelines and approvals to
acquire the Equity Shares. Our Company and the BRLM and their respective directors, officers, agents, affiliates
and representatives accept no responsibility or liability for advising any investor on whether such investor is
eligible to acquire the Equity Shares. Also see “Selling Restrictions” and “Transfer Restrictions” on page 122
and 127, respectively.
Qualified Institutions Placements
This Issue is being made to QIBs in reliance upon Chapter VIII of the SEBI ICDR Regulations and section 42 and
section 62 of the Companies Act, 2013 read with Rule 14 of the Companies (Prospectus and Allotment of
Securities) Rules, 2014, through the mechanism of QIP wherein a listed company in India may issue and allot
equity shares to QIBs on a private placement basis, provided that:

a special resolution approving the QIP has been passed by its shareholders. Such special resolution must
specify; (a) that the allotment of equity shares is proposed to be pursuant to a QIP; and (b) the relevant date;

equity shares of the same class of such company which are proposed to be allotted through the QIP are listed
on a recognised stock exchange in India that has nation-wide trading terminals for a period of at least one
year prior to the date of issuance of notice to its shareholders for convening the meeting to pass the special
resolution;

the aggregate of the proposed issue and all previous QIP made by the issuer in the same financial year does
not exceed five times the net worth (as defined in the SEBI ICDR Regulations) of the issuer as per the audited
balance sheet of the previous financial year;

the issuer complies with the minimum public shareholding requirements set out in the Securities Contract
Regulation Rules, 1957 (“SCRR”);

prior to circulating the preliminary placement document the issuer must prepare and record a list of QIBs to
whom the offer will be made. The offer must be made only to such persons whose names are recorded by the
issuer prior to the invitation to subscribe;

the offer must be made through a private placement offer letter and an application form serially numbered
and addressed specifically to the QIB to whom the offer is made and is sent within 30 days of recording the
names of such QIBs in accordance with Section 42(7) of the Companies Act, 2013;

the issuer shall have completed allotments with respect to any offer or invitation made earlier by the issuer or
shall have withdrawn or abandoned any invitation or offer previously made by the issuer;

the issuer shall offer to each allottee at least such number of securities in the issue which would aggregate to
Rs. 20,000 at the face value of the equity shares;

the explanatory statement to the postal ballot notice to the shareholders for convening the general meeting
must disclose the basis or justification for the price (including premium, if any) at which the offer or invitation
is being made;

the payment to be made for subscription to the equity shares shall be made from the bank account of the
person subscribing to such securities and in case of securities to be held by joint holders, the payment for
subscription to the securities shall be paid from the bank account of the person whose name appears first in
the application;

at least 10% of equity shares issued to QIB’s must be allotted to mutual funds, provided that, if this portion
or any part thereof to be allotted to mutual funds remains unsubscribed, it may be allotted to other QIBs;
110

bidders are not allowed to withdraw their bids after the closure of the issue; and

the offering of securities by issue of public advertisements or utilization of any media, marketing or
distribution channels or agents to inform the public about the issue is prohibited.
Additionally, there is a minimum pricing requirement for pricing equity shares, offered in a QIP, under the SEBI
ICDR Regulations. The Floor Price shall not be less than the average of the weekly high and low of the closing
prices of the equity shares of the same class quoted on the stock exchange during the two weeks preceding the
relevant date. Provided, however an issuer may offer a discount of not more than 5% on the price calculated for
the QIP as above, subject to the approval of the shareholders by a special resolution pursuant to Regulation 82(a)
of the SEBI ICDR Regulations.
The “relevant date” referred to above means the date of the meeting in which the board of directors or the
committee of directors, duly authorised by the board of directors, decides to open the proposed issue; and the
“stock exchange” means any of the recognised stock exchanges in India on which the equity shares of the issuer
of the same class are listed and on which the highest trading volume in such equity shares has been recorded
during two weeks immediately preceding the relevant date.
Equity shares must be allotted within 12 months from the date of the shareholders resolution approving the QIP
and also within 60 days from the date of receipt of application money from the successful applicants. The equity
shares issued pursuant to the QIP must be issued on the basis of a placement document that shall contain all
material information including the information specified in Schedule XVIII of the SEBI ICDR Regulations and
Form PAS- 4 as prescribed under Rule 14 of the Companies (Prospectus and Allotment of Securities) Rules, 2014.
The preliminary placement document and the placement document are private documents provided to only select
QIBs, through serially numbered copies and are required to be placed on the website of the concerned stock
exchanges and of the issuer with a disclaimer to the effect that they are in connection with an issue to QIBs and
no offer is being made to the public or to any category of investors.
Securities allotted to a QIB pursuant to a QIP shall not be sold for a period of one year from the date of allotment
except on a recognised stock exchange in India.
The minimum number of allottees for each QIP shall not be less than:

Two, where the issue size is less than or equal to Rs. 25,000 lakh; and

Five, where the issue size is greater than Rs. 25,000 lakh.
No single allottee shall be allotted more than 50% of the issue size or less than Rs. 20,000 of face value of Equity
Shares. QIBs that belong to the same group or that are under common control shall be deemed to be a single
allottee for this purpose.
The issuer shall also make the requisite filings with the RoC, Stock Exchanges, and SEBI within the stipulated
period as required under the Companies Act, 2013 and the Companies (Prospectus and Allotment of Securities)
Rules, 2014.
Our Company has received the in-principle approval of the Stock Exchanges on June 28, 2016 in terms of
Regulation 28(1) of the Listing Regulations for the Issue. The Board of directors has authorised the Issue pursuant
to a resolution passed at its meeting held on September 25, 2015. The shareholders of our Company have
authorised the Issue pursuant to a special resolution dated December 2, 2015, passed by means of postal ballot.
The Equity Shares offered hereby have not been and will not be registered under the U.S. Securities Act and may
not be offered or sold within the United States except pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the U.S. Securities Act and applicable state securities laws.
The Equity Shares have not been and will not be registered under the U.S. Securities Act, or the laws of
any state of the United States, and may not be offered, sold or delivered within the United States except
pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S.
Securities Act and applicable U.S. state securities laws. Accordingly, the Equity Shares are being offered
and sold outside the United States in offshore transactions in reliance on Regulation S under the U.S.
Securities Act. See “Selling Restrictions” and “Transfer Restrictions” on page 122 and page 127,
respectively.
111
Issue Procedure
1.
Our Company and the BRLM shall circulate serially numbered copies of this Preliminary Placement
Document and the serially numbered Application Form, either in electronic form or physical form, to QIBs
and the Application Form shall be specifically addressed to such QIBs. Pursuant to section 42(7) of the
Companies Act, 2013, our Company shall maintain complete record of the QIBs to whom the Preliminary
Placement Document and the serially numbered Application Form have been dispatched. Our Company will
make the requisite filings with the RoC and with SEBI within the stipulated time period as required under the
Companies Act, 2013 and the rules made thereunder.
2.
The list of QIBs to whom the Application Form is delivered shall be determined by the BRLM at their sole
discretion. Unless a serially numbered Preliminary Placement Document along with the Application
Form is addressed to a particular QIB, no invitation to subscribe shall be deemed to have been made
to such QIB. Even if such documentation were to come into the possession of any person other than the
intended recipient, no offer or invitation to offer shall be deemed to have been made to such other person and
any application that does not comply with this requirement shall be treated as invalid.
3.
QIBs may submit the Application Form, including any revisions thereof, during the Bidding Period to the
BRLM.
4.
Bidders shall submit Bids for, and our Company shall issue and allot to each successful Allottee at least such
number of Equity Shares in the Issue which would aggregate to Rs. 20,000 calculated at the face value of the
Equity Shares.
5.
QIBs will be required to indicate the following in the Application Form:
(a) name of the QIB to whom Equity Shares are to be Allotted;
(b) number of Equity Shares Bid for;
(c) price at which they offer to apply for the Equity Shares provided that QIBs may also indicate that they
are agreeable to submit a bid at “Cut-off Price” which shall be any price as may be determined by our
Company in consultation with the BRLM at or above the Floor Price, net of such discount as approved
in accordance with SEBI ICDR Regulations and decided by the Board as approved in accordance with
SEBI ICDR Regulations and decided by the Board. The Company may offer a discount up to 5% to the
Floor Price in accordance with the proviso of Regulation 85(1) of the SEBI ICDR Regulations;
(d) a representation that it is outside the United States and is acquiring the Equity Shares in an offshore
transaction in reliance on Regulation S under the U.S. Securities Act and it has agreed to all the
representations set forth in the Application Form; and
(e) the details of the depository account(s) to which the Equity Shares should be credited.
Note: Each eligible sub-account of an FII other than a sub-account which is a foreign corporate or a
foreign individual will be considered as an individual QIB and separate Application Forms would be
required from each such sub – account for submitting Bids.
6.
Once a duly filled in Application Form is submitted by the QIB, such Application Form constitutes an
irrevocable offer and the same cannot be withdrawn after the Issue Closing Date. The Issue Closing Date
shall be notified to the Stock Exchanges and the QIBs shall be deemed to have been given notice of such date
after the receipt of the Application Form.
7.
The Bids made by asset management companies or custodians of mutual funds shall specifically state the
names of the concerned schemes for which the Bids are made. In case of a mutual fund, a separate Bid can
be made in respect of each scheme of the mutual fund registered with SEBI. All such bids/applications by or
on behalf of various schemes of a mutual fund shall be treated as a single application.
8.
Based on the Application Forms received, our Company in consultation with the BRLM shall determine the
Issue Price and the number of Equity Shares to be issued. We shall notify the Stock Exchange of the Issue
Price. On determining the Issue Price and the QIBs to whom Allocation shall be made, such QIBs shall be
sent serially numbered Confirmation of Allocation Note (“CAN”) along with serially numbered Preliminary
Placement Document either in electronic form or through physical delivery. The dispatch of the CANs shall
be deemed a valid, binding and irrevocable contract for the QIBs to pay the entire Issue Price for all the Equity
Shares Allocated to such QIB. The CAN shall contain details like the number of Equity Shares Allocated to
112
the QIB, payment instructions including the details of the amounts payable by the QIB for Allotment of the
Equity Shares in its name and the Pay-In Date as applicable to the respective QIBs.
Following the receipt of the CAN, each QIB would have to make the payment of the entire application monies
for the Equity Shares indicated in the CAN at the Issue Price through electronic transfer to the Escrow
Account by the Pay-In Date as specified in the CAN sent to the respective QIB. Please note that the
allocation shall be at the absolute discretion of our Company and will be based on the recommendation
of the BRLM.
9.
No payment shall be made by QIBs in cash. Please note that any payment of application monies for the Equity
Shares shall be made from the bank accounts of the relevant QIBs applying for the Equity Shares. Monies
payable on Equity Shares to be held by joint holders shall be paid from the bank account of the person whose
name appears first in the application. Pending allotment, all monies received for subscription of the Equity
Shares shall be kept by our Company in a separate bank account with a scheduled bank and shall be utilised
only for the purposes permitted under the Companies Act, 2013.
10. Upon receipt of the application monies from the QIBs, our Company shall issue and allot Equity Shares as
per the details in the CAN to the QIBs. Our Company will intimate the details of the Allotment to the Stock
Exchanges.
11. After passing the resolution for Allotment and prior to crediting the Equity Shares into the depository
participant accounts of the successful Bidders, our Company shall apply to the Stock Exchanges for listing
approval.
12. After receipt of the listing approval from the Stock Exchanges, our Company shall credit the Equity Shares
into the Depository Participant accounts of the respective QIB in accordance with the details submitted by
the QIBs in the Application Forms.
13. Our Company shall then apply to Stock Exchanges for the final trading and listing permission.
14. The Equity Shares that have been credited to the beneficiary account with the Depository Participant of the
QIBs shall be eligible for trading on the Stock Exchanges only upon the receipt of final listing and trading
approval from Stock Exchanges.
15. Our Company and the BRLM shall not be responsible for any delay or non-receipt of the communication of
the final listing and trading permissions from the Stock Exchanges or any loss arising from such delay or nonreceipt. Final listing and trading approval granted by the Stock Exchanges is also placed on their respective
websites. QIBs are advised to apprise themselves of the status of the receipt of the permissions from Stock
Exchanges or our Company.
Qualified Institutional Buyers
Only QIBs as defined in Regulation 2(1)(zd) of the SEBI ICDR Regulations and not otherwise excluded pursuant
to Regulation 86(1)(b) of Chapter VIII of the SEBI ICDR Regulations are eligible to invest. Under Regulation
86(1)(b) of the SEBI ICDR Regulations, no Allotment shall be made, either directly or indirectly, to any QIB who
is a Promoter or any person related to the Promoters. Currently QIBs include:

Alternate investment funds registered with SEBI;

Eligible FPIs;

Foreign venture capital investors registered with SEBI;

Insurance companies registered with Insurance Regulatory and Development Authority;

Insurance funds set up and managed by the army, navy, or air force of the Union of India;

Insurance funds set up and managed by the Department of Posts, India;

Multilateral and bilateral development financial institutions;

Mutual funds registered with SEBI;

Pension Funds with minimum corpus of Rs. 2,500 lakh;

Provident Funds with minimum corpus of Rs. 2,500 lakh;
113

Public financial institutions as defined in section 2(72) of the Companies Act, 2013;

Scheduled commercial banks;

State industrial development corporations;

National Investment Fund set up by resolution no. F. No. 2/3/2005-DDII dated November 23, 2005 of
Government of India published in the Gazette of India; and

Venture capital funds registered with SEBI;
FIIs (other than a sub-account which is a foreign corporate or a foreign individual) and Eligible FPIs shall
participate in this Issue under Schedule 2 and Schedule 2A of FEMA, respectively. FIIs and Eligible FPIs
are permitted to participate in the Issue subject to compliance with all applicable laws and such that the
shareholding of the FPIs and FIIs does not exceed specified limits as prescribed under applicable laws in
this regard. Other eligible non-resident QIBs shall participate in the Issue under Schedule 1 of the FEMA
and shall make the payment of application money through the foreign currency non-resident (FCNR)
account and not through the special non-resident rupee (SNRR) account. All non-resident QIBs shall
ensure that the investment amount is paid out of inward remittance of foreign exchange received through
normal banking channels and as per RBI’s notification no. FEMA 20/2000 – RB dated May 3, 2000, as
amended from time to time.
In terms of the SEBI FPI Regulations, the issue of Equity Shares to a single FPI or an investor group (which means
the same set of ultimate beneficial owner(s) investing through multiple entities) is not permitted to be 10.00% or
above of our post-Issue Equity Share capital. Further, in terms of the FEMA, the total holding by each FPI shall
be below 10% of our total paid-up Equity Share capital and the total holdings of all FPIs put together shall not
exceed 24% of our paid-up Equity Share capital. The aggregate limit of 24% may be increased up to the sectoral
cap by way of a resolution passed by the Board of Directors followed by a special resolution passed by the
shareholders of our Company. The existing limit for FIIs and FPIs in our Company is 24% of the paid up capital
of our Company.
Eligible FPIs are permitted to participate in the Issue subject to compliance with conditions and restrictions which
may be specified by the Government from time to time.
An FII who holds a valid certificate of registration from SEBI shall be deemed to be an FPI until the expiry of the
block of three years for which fees have been paid as per the SEBI FII Regulations. Subject to trailing condition,
an FII or sub-account of an FII may participate in the Issue until the expiry of its registration as a FII or subaccount or until it obtains a certificate of registration as FPI, whichever is earlier. An FII or sub-account shall not
be eligible to invest as an FII after registering as an FPI under the SEBI FPI Regulations.
In terms of FEMA, for calculating the aggregate holding of FPIs in a company, holding of all registered FPIs as
well as holding of FIIs (being deemed FPIs) shall be included.
Under Regulation 86(1)(b) of the SEBI ICDR Regulations, no allotment shall be made pursuant to this Issue,
either directly or indirectly, to any QIB being our Promoter or any person related to our Promoters. QIBs which
have all or any of the following rights shall be deemed to be persons related to our Promoters:
(i)
Rights under a shareholders’ agreement or voting agreement entered into with our Promoter or persons
related to our Promoter;
(ii)
Veto rights; or
(iii)
A right to appoint any nominee director on the Board
Provided, however, that a QIB which does not hold any Equity Shares in our Company and who has acquired the
aforesaid rights in the capacity of a lender shall not be deemed to be a person related to the Promoter.
Neither our Company nor the BRLM nor any of their respective directors, officers, counsel, advisors,
representatives, agents or affiliates are liable for any amendments or modification or changes in applicable
laws or regulations, which may occur after the date of this Preliminary Placement Document. QIBs are
advised to make their independent investigations and satisfy themselves that they are eligible to apply. QIBs
are advised to ensure that any single Application Form from them does not exceed the investment limits or
maximum number of Equity Shares that can be held by them under applicable law or regulation or as
specified in this Preliminary Placement Document. Further, QIBs are required to satisfy themselves that
any requisite compliance pursuant to this Allotment such as public disclosures under applicable laws is
114
complied with. QIBs are advised to consult their advisers in this regard. Furthermore, QIBs are required
to satisfy themselves that their Application Form would not eventually result in triggering a tender offer
under the Takeover Regulations.
Note: Affiliates or associates of the BRLM who are QIBs may participate in this Issue subject to compliance with
applicable laws.
Allotments made to FVCIs, VCFs and AIFs in the Issue are subject to the rules and regulations that are applicable
to each of them respectively, including in relation to lock-in requirements.
A minimum of 10% of the Equity Shares offered in the Issue shall be Allotted to Mutual Funds. If no Mutual Fund
is agreeable to take up the minimum portion as specified above, such minimum portion or part thereof may be
Allotted to other QIBs.
Bid Process
Application Form
QIBs are permitted to only use the serially numbered Application Forms (which is addressed to the QIB) supplied
by our Company and the BRLM in either electronic form or by physical delivery for the purpose of making a Bid
(including any revision of a Bid) in terms of this Preliminary Placement Document.
By making a Bid (including revisions thereof) for Equity Shares pursuant to the terms of this Preliminary
Placement Document, each QIB will be deemed to have made the following representations and warranties, and
the representations, warranties, acknowledgements and agreements made under “Representations by Investors”.
The representations listed in this section shall be included in the Application Form:
1.
The QIB confirms that it is a QIB in terms of Regulation 2(1)(zd) of the SEBI ICDR Regulations and has a
valid and existing registration under the applicable laws of India and is eligible to participate in this Issue and
is not excluded under Regulation 86 of the SEBI ICDR Regulations;
2.
The QIB confirms that it is not a Promoter of our Company and is not a person related to the Promoter of our
Company, either directly or indirectly and its Application Form does not directly or indirectly represent the
Promoter or Promoter Group or a person related to the Promoter of our Company;
3.
The QIB confirms that it has no rights under a shareholders’ agreement or voting agreement with the Promoter
or persons related to the Promoter, no veto rights or right to appoint any nominee director on the Board of
our Company other than such rights acquired in the capacity of a lender (not holding any Equity Shares)
which shall not be deemed to be a person related to the Promoter;
4.
The QIB has no right to withdraw its Bid after the Issue Closing Date;
5.
The QIB confirms that if Equity Shares are Allotted pursuant to this Issue, it shall not, for a period of one
year from Allotment, sell such Equity Shares otherwise than on the floor of the Stock Exchanges;
6.
The QIB confirms that the QIB is eligible to Bid and hold Equity Shares so Allotted and together with any
Equity Shares held by the QIB prior to this Issue. The QIB further confirms that its holding of the Equity
Shares does not, and shall not, exceed the level permissible as per any applicable regulations applicable to
the QIB;
7.
The QIB confirms that the Bids will not eventually result in triggering an open offer under the Takeover
Regulations;
8.
The QIB confirms that, to the best of its knowledge and belief, together with other QIBs in this Issue that
belongs to the same group or are under common control, the Allotment to the QIB shall not exceed 50% of
the Issue Size. For the purposes of this statement:
(a) The expression “belongs to the same group” shall derive meaning from the concept of “companies under
the same group” as provided in sub-section (11) of Section 372 of the Companies Act, 1956; and
(b) “Control” shall have the same meaning as is assigned to it by Clause 1(e) of Regulation 2 of the Takeover
Regulations;
115
9.
The QIBs shall not undertake any trade in the Equity Shares credited to its Depository Participant account
until such time that the final listing and trading approval for the Equity Shares is issued by the Stock
Exchanges; and
10. The QIB represents that it is outside the United States and is acquiring the Equity Shares in an offshore
transaction in reliance on Regulation S under the U.S. Securities Act and it has agreed to certain other
representations set forth in the Application Form.
QIBs MUST PROVIDE THEIR DEPOSITORY ACCOUNT DETAILS, THEIR DEPOSITORY
PARTICIPANT’S NAME, DEPOSITORY PARTICIPANT IDENTIFICATION NUMBER AND
BENEFICIARY ACCOUNT NUMBER IN THE APPLICATION FORM. QIBs MUST ENSURE THAT
THE NAME GIVEN IN THE APPLICATION FORM IS EXACTLY THE SAME AS THE NAME IN
WHICH THE DEPOSITORY ACCOUNT IS HELD. FOR THIS PURPOSE, ELIGIBLE SUBACCOUNTs OF AN FII WOULD BE CONSIDERED AS AN INDEPENDENT QIB.
IF SO REQUIRED BY THE BRLM, THE QIB SUBMITTING A BID, ALONG WITH THE
APPLICATION FORM, WILL ALSO HAVE TO SUBMIT REQUISITE DOCUMENT(S) TO BRLM TO
EVIDENCE THEIR STATUS AS A “QIB” AS DEFINED HEREINABOVE.
Demographic details such as an address and a bank account will be obtained from the Depositories as per the
Depository Participant account details given above.
The submission of an Application Form by the QIB shall be deemed a valid, binding and irrevocable offer for the
QIB to pay the entire Issue Price for its share of Allotment (as indicated by the CAN) and becomes a binding
contract on the QIB, upon issuance of the CAN by the Issuer in favour of the QIB.
Bids by Mutual Funds
The Bids submitted by the asset management companies or custodians of Mutual Funds shall specifically state
the names of the concerned schemes for which the Bids are made. Each scheme or fund of a mutual fund will be
required to submit a separate Application Form. Such applications will not be treated as multiple Bids provided
that the Bids clearly indicate the scheme for which the Bid has been made. However, for the purpose of calculating
the number of allottees or applicants, various schemes of the same mutual fund will be considered as a single
allottee or applicant. Under the current regulations, the following restrictions are applicable for investments by
Mutual Funds: No mutual fund scheme shall invest more than 10% of its net asset value in Equity Shares or equity
related instruments of any company provided that the limit of 10% shall not be applicable for investments in index
funds or sector or industry specific funds. No mutual fund under all its schemes should own more than 10% of
any company's paid-up capital carrying voting rights. Bidders are advised to ensure that any single Bid from them
does not exceed the investment limits or maximum number of Equity Shares that can be held by them under
applicable laws.
Submission of Application Form
All Application Forms shall be required to be duly completed with information including the name of the QIB,
the price and the number of Equity Shares applied. The Application Form shall be submitted to the BRLM either
through electronic form or through physical delivery at the following addresses:
Name of the
BRLM
Equirus Capital
Private Limited
Address
Contact Person
Email
Phone
12th Floor, C Wing,
Marathon Futurex, NM
Joshi Marg, Lower Parel
Mumbai 400 013
Munish Agarwal
project.cinnamon
@equirus.com
Tel: (91 22) 4432
0600
Fax: (91 22) 4432
0601
The BRLM shall not be required to provide any written acknowledgement of the same.
Permanent Account Number or PAN
Each QIB should mention its Permanent Account Number (“PAN”) allotted under the IT Act. The copy of the
PAN card or PAN allotment letter is required to be submitted with the Application Form. Bids without this
information will be considered incomplete and is liable to be rejected. It is to be specifically noted that applicant
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should not submit the GIR number instead of the PAN as the Application Form is liable to be rejected on this
ground.
Pricing and Allocation
Build-up of the book
The QIBs shall submit their Bids (including the revision thereof) through the Application Form within the Bidding
Period to the BRLM. The book shall be maintained by the BRLM.
Price discovery and Allocation
Our Company, in consultation with the BRLM, shall finalise the Issue Price for the Equity Shares, which shall be
at or above the Floor Price. The Issuer may offer a discount of not more than 5% on the Floor Price in terms of
Regulation 85 of the SEBI ICDR Regulations. After finalisation of the Issue Price, our Company shall update this
Preliminary Placement Document with the details of the Issue and file the Placement Document with the Stock
Exchange.
After finalisation of the Issue Price, our Company shall update this Preliminary Placement Document with the
Issue details and file the same with Stock Exchange as the Placement Document.
Method of Allocation
Our Company shall determine the Allocation in consultation with the BRLM on a discretionary basis and in
compliance with Chapter VIII of the SEBI ICDR Regulations.
Application Forms received from the QIBs at or above the Issue Price shall be grouped together to determine the
total demand. The Allocation to all such QIBs will be made at the Issue Price. Allocation to Mutual Funds for up
to a minimum of 10% of the Issue Size shall be undertaken subject to valid Application Form being received at
or above the Issue Price.
THE DECISION OF OUR COMPANY, IN CONSULTATION WITH THE BRLM, IN RESPECT OF
ALLOCATION SHALL BE FINAL AND BINDING ON ALL QIBs. QIBs MAY NOTE THAT
ALLOCATION OF EQUITY SHARES IS AT THE SOLE AND ABSOLUTE DISCRETION OF OUR
COMPANY, IN CONSULTATION WITH THE BRLM, AND QIBs MAY NOT RECEIVE ANY
ALLOCATION EVEN IF THEY HAVE SUBMITTED VALID APPLICATION FORMS AT OR ABOVE
THE ISSUE PRICE. NEITHER OUR COMPANY NOR THE BRLM ARE OBLIGED TO ASSIGN ANY
REASONS FOR SUCH NON-ALLOCATION.
CAN
Based on the Application Forms received, our Company, in consultation with the BRLM, will, in its sole and
absolute discretion, decide the list of QIBs to whom the serially numbered CAN shall be sent, pursuant to which
the details of the Equity Shares Allocated to them and the details of the amounts payable for Allotment of the
same in their respective names shall be notified to such QIBs. Additionally, the CAN would include details of
Escrow Account into which such payments would need to be made, Pay-In Date as well as the probable designated
date (“Designated Date”), being the date of credit of the Equity Shares to the QIB’s account, as applicable to the
respective QIBs.
The eligible QIBs would also be sent a serially numbered Placement Document either in electronic form or by
physical delivery along with the serially numbered CAN.
The dispatch of the serially numbered Placement Document and the CAN to the QIB shall be deemed a valid,
binding and irrevocable contract for the QIB to furnish all details that may be required by the BRLM and our
Company and to pay the entire Issue Price for all the Equity Shares Allocated to such QIB.
QIBs ARE ADVISED TO INSTRUCT THEIR DEPOSITORY PARTICIPANT TO ACCEPT THE
EQUITY SHARES THAT MAY BE ALLOCATED / ALLOTTED TO THEM PURSUANT TO THE
ISSUE.
Bank Account for the Payment of Bid Money
Our Company has opened an escrow account titled “CFS – QIP 2016 Escrow Account” (the “Escrow Account”)
with the Escrow Bank in terms of the arrangements between our Company, the BRLM, IDBI Bank Limited (acting
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as the Escrow Bank). The QIBs will be required to deposit the entire amount payable for the Equity Shares
Allocated to it by the Pay-In Date as mentioned in their respective CAN.
Payments are to be made only through electronic fund transfer.
Note: Payments through cheques are liable to be rejected.
If the payment is not made favouring the Escrow Account within the time stipulated in the CAN, the Application
Form and the CAN of the QIB are liable to be cancelled.
In case of cancellations or default by the QIBs, our Company and the BRLM have the right to re-allocate the
Equity Shares at the Issue Price among existing or new QIBs at their sole and absolute discretion, subject to the
compliance with the requirements of the Companies Act, 2013 and the SEBI ICDR Regulations.
Our Company undertakes to utilise the amount in the Escrow Account only for the purposes of: (i) adjustments
against Allotment of Equity Shares in the Issue; or (ii) repayment of application money if our Company is not
able to Allot Equity Shares in the Issue.
Designated Date and Allotment of Equity Shares
1.
The Equity Shares will not be Allotted unless the QIBs pay the Issue Price to the Escrow Account as stated
above.
2.
Subject to the satisfaction of the terms and conditions of the Placement Agreement, our Company will ensure
that the Allotment of the Equity Shares is completed by the Designated Date provided in the CAN for the
QIBs who have paid the aggregate subscription amounts as stipulated in the CAN.
3.
In accordance with the SEBI ICDR Regulations, Equity Shares will be issued and Allotment shall be made
only in the dematerialised form to the Allottees. Allottees will have the option to re-materialise the Equity
Shares, if they so desire, as per the provisions of the Companies Act, 2013 and the Depositories Act.
4.
Our Company reserves the right to cancel this Issue at any time up to Allotment without assigning any reasons
whatsoever.
5.
Post receipt of the listing approval of the Stock Exchanges, the Issuer shall credit the Equity Shares into the
Depository Participant account of the QIBs.
6.
Following the Allotment and credit of Equity Shares into the QIBs Depository Participant account, our
Company will apply for final listing and trading approval for trading on the Stock Exchanges.
7.
In the event our Company is unable to Issue and Allot the Equity Shares or on cancellation of the Issue, within
60 days from the date of receipt of application money, in accordance with section 42 of the Companies Act,
2013 our Company shall repay the application money within 15 days from expiry of 60 days, failing which
our Company shall repay that money with interest at the rate of 12% per annum from expiry of the 60 th day.
The application money to be refunded by us shall be refunded to the same bank account from which
application money was remitted by the QIBs.
8.
The Escrow Bank shall release the monies lying to the credit of the Escrow Bank Account to our Company
after the receipt of the final listing and trading approval from the Stock Exchanges.
9.
In case of QIBs who have been Allotted more than 5% of the Equity Shares in the Issue, our Company shall
disclose the name and the number of the Equity Shares Allotted to such QIB to Stock Exchanges and Stock
Exchanges shall make the same available on their website.
Other Instructions
Our Right to Reject Bids
Our Company, in consultation with the BRLM, may reject Bids, in part or in full, without assigning any reasons
whatsoever. The decision of our Company and the BRLM in relation to the rejection of Bids shall be final and
binding.
Equity Shares in dematerialised form with NSDL or CDSL
1.
The Allotment of the Equity Shares in this Issue shall be only in dematerialised form, (i.e., not in the form of
physical certificates but be fungible and be represented by the statement issued through the electronic mode).
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2.
A QIB applying for Equity Shares must have at least one beneficiary account with a Depository Participant
of either NSDL or CDSL prior to making the Bid.
3.
Allotment to a successful QIB will be credited in electronic form directly to the beneficiary account (with the
Depository Participant) of the QIB.
4.
Equity Shares in electronic form can be traded only on the stock exchanges having electronic connectivity
with NSDL and CDSL. BSE has electronic connectivity with NSDL and CDSL.
5.
The trading of the Equity Shares would be in dematerialised form only for all QIBs in the demat segment of
BSE.
6.
Our Company will not be responsible or liable for the delay in the credit of the Equity Shares due to errors in
the Application Forms or on part of the QIBs.
Compliance officer
Rahul Sawale
Group Company Secretary and Compliance Officer
Plot No. F/11 & F/12, WICEL
Opp. Seepz Main Gate, Central Road, Andheri (East)
Mumbai 400093
Tel: (91 22) 6700 1000
Fax: (91 22) 2832 4404
Email: [email protected]
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PLACEMENT AGREEMENT
Placement Agreement
The Book Running Lead Manager has entered into a placement agreement dated June 28, 2016 with our Company
(the “Placement Agreement”), pursuant to which the Book Running Lead Manager has agreed to manage the
Issue and act as placement agent in connection with th e proposed Issue and procure subscriptions for the Equity
Shares on a reasonable efforts basis pursuant to Chapter VIII of SEBI ICDR Regulations and the Companies Act,
2013 read with rules thereunder.
The Placement Agreement contains customary representations, warranties and indemnities from our Company
and the Book Running Lead Manager, and it is subject to termination in accordance with the terms contained
therein.
Applications shall be made to list the Equity Shares issued pursuant to the Issue and admit them to trading on the
Stock Exchanges. No assurance can be given as to the liquidity or sustainability of the trading market for such
Equity Shares, the ability of holders of the Equity Shares to sell their Equity Shares or the price at which holders
of the Equity Shares will be able to sell their Equity Shares.
This Preliminary Placement Document has not been, and will not be, registered as a prospectus with the RoC and,
no Equity Shares issued pursuant to the Issue will be offered in India or overseas to the public or any members of
the public in India or any other class of investors, other than Eligible QIBs.
In connection with the Issue, the Book Running Lead Manager (or their affiliates) may, for its own accounts, enter
into asset swaps, credit derivatives or other derivative transactions relating to the Equity Shares at the same time
as the offer and sale of the Equity Shares, or in secondary market transactions. As a result of such transactions,
the Book Running Lead Manager (or its affiliates) may hold long or short positions in such Equity Shares. These
transactions may comprise a substantial portion of the Issue and no specific disclosure will be made of such
positions. Affiliates of the Book Running Lead Manager may purchase Equity Shares and be allocated Equity
Shares. See “Representations by Investors — Off-shore Derivative Instruments (P-Notes)”.
From time to time, the Book Running Lead Manager and its affiliates may engage in transactions with and perform
services for our Company, Subsidiaries, group companies or affiliates in the ordinary course of business and have
engaged, or may in the future engage, in commercial banking and investment banking transactions with our
Company, Subsidiaries and group companies or affiliates, for which they have received compensation and may
in the future receive compensation.
Lock-up
Our Company undertakes that it will not for a period of 45 days from the date of Allotment under the Placement,
without the prior written consent of the Book Running Lead Manager, directly or indirectly, (a) purchase, lend,
sell, offer, issue, contract to issue, issue or offer any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, any Equity Shares or
any securities convertible into or exercisable for Equity Shares (including, without limitation, securities
convertible into or exercisable or exchangeable for Equity Shares which may be deemed to be beneficially owned),
or file any registration statement under the U.S. Securities Act, with respect to any of the foregoing, or (b) enter
into any swap or other agreement or any transaction that transfers, in whole or in part, directly or indirectly, any
of the economic consequences associated with the ownership of any of the Equity Shares or any securities
convertible into or exercisable or exchangeable for Equity Shares (regardless of whether any of the transactions
described in clause (a) or (b) is to be settled by the delivery of Equity Shares or such other securities, in cash or
otherwise), or (c) deposit Equity Shares with any other depositary in connection with a depositary receipt facility,
or (d) publicly announce any intention to enter into any transaction falling within (a) to (c) above or enter into any
transaction (including a transaction involving derivatives) having an economic effect similar to that of an issue or
offer or deposit of Equity Shares in any depositary receipt facility or publicly announce any intention to enter into
any transaction falling within (a) to (c) above. Provided that the foregoing restriction shall not apply to an issuance
of Equity Shares or options pursuant to any employee stock option scheme formulated by the Company.
Each of our Promoter and Promoter Group severally agree that they shall not without the prior written consent of
the Book Running Lead Manager, during the period commencing on the date hereof and ending 180 days after the
date of allotment of the Equity Shares (the “Lock-up Period”), directly or indirectly: (a) sell, lend, contract to
sell, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise
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transfer or dispose of, directly or indirectly, any Lock-up Shares, or any securities convertible into or exercisable
or exchangeable for Lock-up Shares or publicly announce an intention with respect to any of the foregoing; (b)
enter into any swap or other agreement that transfers, directly or indirectly, in whole or in part, any of the economic
consequences of ownership of Lock-up Shares or any securities convertible into or exercisable or exchangeable
for Lock-up Shares; (c) sell, lend, contract to sell, purchase any option or contract to sell, grant any option, right
or warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any shares or interest in an
entity which holds any Lock-up Shares or (d) publicly announce any intention to enter into any transaction whether
any such transaction described in (a), (b) or (c) above is to be settled by delivery of Equity Shares, or such other
securities, in cash or otherwise, or enter into any transaction (including a transaction involving derivatives) having
an economic effect similar to that of an issue or offer or deposit of Equity Shares in any depositary receipt facility
or publicly announce any intention to enter into any transaction falling within (a) to (c) above.
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SELLING RESTRICTIONS
The distribution of this Preliminary Placement Document or any offering material and the offering, sale or
delivery of the Equity Shares is restricted by law in certain jurisdictions. Therefore, persons who may come into
possession of this Preliminary Placement Document or any offering material are advised to consult with their
own legal advisors as to what restrictions may be applicable to them and to observe such restrictions. This
Preliminary Placement Document may not be used for the purpose of an offer or invitation in any circumstances
in which such offer or invitation is not authorised.
General
No action has been taken or will be taken that would permit a public offering of the Equity Shares to occur in any
jurisdiction other than India, or the possession, circulation or distribution of this Preliminary Placement Document
or any other material relating to the Company or the Equity Shares in any jurisdiction where action for such
purpose is required. Accordingly, the Equity Shares may not be offered or sold, directly or indirectly, and neither
this Preliminary Placement Document nor any offering materials or advertisements in connection with the Equity
Shares may be distributed or published in or from any country or jurisdiction except under circumstances that
will result in compliance with any applicable rules and regulations of any such country or jurisdiction. The Issue
will be made in compliance with the applicable SEBI ICDR Regulations. Each purchaser of the Equity Shares in
this Issue will be deemed to have made acknowledgments and agreements as described under “Representations
by Investors”, “Selling Restrictions” and “Transfer Restrictions” on page 3, 122 and 127.
Australia
This Preliminary Placement Document is not a disclosure document under Chapter 6D of the Corporations Act
2001 (the “Australian Corporations Act”), has not been lodged with the Australian Securities & Investments
Commission and does not purport to include the information required of a disclosure document under the
Australian Corporations Act. (i) The offer of Equity Shares under this Preliminary Placement Document is only
made to persons to whom it is lawful to offer Equity Shares without disclosure to investors under Chapter 6D of
the Australian Corporations Act under one or more exemptions set out in Section 708 of the Australian
Corporations Act; (ii) this Preliminary Placement Document is made available in Australia to persons as set forth
in clause (i) above; and (iii) by accepting this offer, the offeree represents that the offeree is such a person as set
forth in clause (ii) above and agrees not to sell or offer for sale within Australia any Equity Share sold to the
offeree within 12 months after their transfer to the offeree under this Preliminary Placement Document.
Bahrain
All applications for investment should be received, and any allotments should be made, in each case from outside
Bahrain. The Preliminary Placement Document has been prepared for private information purposes of intended
investors only who will be high net worth individuals and institutions. Our Company has not made and will not
make any invitation to the public in the Kingdom of Bahrain and the Preliminary Placement Document will not
be issued, passed to, or made available to the public generally. The Bahrain Monetary Agency (“BMA”) has not
reviewed, nor has it approved, the Preliminary Placement Document or the marketing of Equity Shares in the
Kingdom of Bahrain. Accordingly, Equity Shares may not be offered or sold in Bahrain or to residents thereof
except as permitted by Bahrain law.
Cayman Islands
No offer or invitation to purchase Equity Shares may be made to the public in the Cayman Islands.
Dubai International Financial Centre
This Preliminary Placement Document relates to an exempt offer (an “Exempt Offer”) in accordance with the
Offered Securities Rules of the Dubai Financial Services Authority (the “DFSA”). This Preliminary Placement
Document is intended for distribution only to persons of a type specified in those rules. It must not be delivered
to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents
in connection with Exempt Offers. The DFSA has not approved this Preliminary Placement Document nor taken
steps to verify the information set out in it, and has no responsibility for it. The Equity Shares to which this
Preliminary Placement Document relates may be illiquid and/or subject to restrictions on their resale. Prospective
purchasers of the Equity Shares offered should conduct their own due diligence on the Equity Shares. If you do
122
not understand the contents of this Preliminary Placement Document, you should consult an authorized financial
adviser. For the avoidance of doubt, the Equity Shares are not interests in a “fund” or a “collective investment
scheme” within the meaning of either the Collective Investment Law (DIFC Law No. 2 of 2010) or the Collective
Investment Rules Module of the Dubai Financial Services Authority Rulebook.
European Economic Area
In relation to each Member State of the European Economic Area which has implemented the Prospectus
Directive (each, a “Relevant Member State”), with effect from and including the date on which the Prospectus
Directive is implemented in that Relevant Member State (the “Relevant Implementation Date”) the Equity
Shares will not be offered to the public in that Relevant Member State prior to the publication of a prospectus in
relation to the Equity Shares which has been approved by the competent authority in that Relevant Member State
or, where appropriate, approved in another Relevant Member State and notified to the competent authority in
that Relevant Member State, all in accordance with the Prospectus Directive, except that, with effect from and
including the Relevant Implementation Date, an offer of Equity Shares may be made to the public in that Relevant
Member State at any time:

to any legal entity which is a qualified investor as defined in the Prospectus Directive;

to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD
Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the
Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent
of the Book Running Lead Manager for any such offer; or

in any other circumstances which do not require the publication by the Issuer of a prospectus pursuant to
Article 3(2) of the Prospectus Directive.
For the purposes of this provision, the expression an “offer of common shares to the public” in relation to any
shares in any Relevant Member State means the communication in any form and by any means of sufficient
information on the terms of the offer and the Equity Shares to be offered so as to enable an investor to decide to
purchase or subscribe the Equity Shares, as the same may be varied in that Relevant Member State by any
measure implementing the Prospectus Directive in that Relevant Member State and the expression “Prospectus
Directive” means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive,
to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in
each Relevant Member State and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.
Hong Kong
No Equity Shares have been offered or sold, and no Equity Shares may be offered or sold, in Hong Kong by
means of any document, other than to persons whose ordinary business is to buy or sell shares or debentures,
whether as principal agent; or to “professional investors” as defined in the Securities and Futures Ordinance
(Cap. 571) of Hong Kong and any rules made under that Ordinance; or in other circumstances which do not
result in the document being a “prospectus” as defined in the Companies Ordinance (Cap. 32) of Hong Kong or
which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32) of Hong
Kong. No document, invitation or advertisement relating to the Equity Shares has been issued or may be issued,
which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong
(except if permitted under the securities laws of Hong Kong) other than with respect to the Equity Shares which
are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined
in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance.
Japan
The Equity Shares have not been and will not be registered under the Financial Instruments and Exchange Law
of Japan (Law No. 25 of 1948, as amended; the “FIEL”) and the Book has represented and agreed that it will
not offer or sell any Equity Shares, directly or indirectly, in Japan or to, or for the benefit of, any resident of
Japan (which term as used herein means any person resident in Japan, including any corporation or other entity
organised under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to, or
for the benefit of, a resident of Japan, except pursuant to an exemption from the registration requirements of, and
otherwise in compliance with, the FIEL and any other applicable laws, regulations and ministerial guidelines of
Japan.
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Korea
The Equity Shares have not been and will not be registered under the Financial Investment Business and Capital
Markets Act of Korea and none of the Equity Shares may be offered or sold, directly or indirectly, in Korea or
to any resident of Korea (as defined under the Foreign Exchange Transaction Act of Korea and its Enforcement
Decree) except pursuant to an exemption from the registration requirements of the Financial Investment Business
and Capital Markets Act of Korea available thereunder and/or in compliance with applicable laws and regulations
of Korea.
Kuwait
The Equity Shares have not been authorised or licensed for offering, marketing or sale in the State of Kuwait.
The distribution of the Preliminary Placement Document and the offering and sale of the Equity Shares in the
State of Kuwait is restricted by law unless a license is obtained from the Kuwaiti Ministry of Commerce and
Industry in accordance with Law 31 of 1990.
Luxembourg
The Equity Shares offered in this Preliminary Placement Document may not be offered, sold or delivered to the
public within the Grand Duchy of Luxembourg. This document is only intended for institutional investors. It is
personal to each offeree and does not constitute an offer to any other person or to the public generally in
Luxembourg to subscribe for or otherwise acquire the Equity Shares. Distribution of this Preliminary Placement
Document to any person other than the offeree and those persons, if any, retained to advise such offeree with
respect thereto is unauthorised and any disclosure of any of its contents, without prior written consent of the
Company, is prohibited.
Malaysia
No prospectus or other offering material or document in connection with the offer and sale of the Equity Shares
has been or will be registered with the Securities Commission of Malaysia pursuant to the Securities Commission
Act, 1993 as the offer for purchase of, or invitation to purchase the Equity Shares is meant to qualify as an
“excluded offer or excluded invitation” within the meaning of Section 38 of the Securities Commission Act,
1993. Each Lead Manager has severally represented, warranted or agreed that the Equity Shares will not be
offered, sold, transferred or otherwise disposed, directly or indirectly, nor any document or other material in
connection therewith distributed, in Malaysia, other than to persons falling within any one of the categories or
person specified in Schedule 2 and/or Schedule 3 of the Securities Commission Act, 1993 who are also persons
to whom any offer or invitation to purchase or sell would be an excluded offer or invitation within the meaning
of Section 38 of the Securities Commission Act, 1993.
Mauritius
The Equity Shares may not be offered, distributed or sold, directly or indirectly, to the public in Mauritius.
Neither this Preliminary Placement Document, nor any offering material or information contained herein relating
to the offer of the Equity Shares, may be released or issued to the public in Mauritius or used in connection with
any such offer. This Preliminary Placement Document does not constitute an offer to sell the Equity Shares to
the public in Mauritius. This Preliminary Placement Document is not a prospectus.
New Zealand
This Preliminary Placement Document is not a prospectus. It has not been prepared or registered in accordance
with the Securities Act 1978 of New Zealand (the “New Zealand Securities Act”). This Preliminary Placement
Document is being distributed in New Zealand only to persons whose principal business is the investment of
money or who, in the course of and for the purposes of their business, habitually invest money, within the
meaning of section 3(2)(a)(ii) of the New Zealand Securities Act (“Habitual Investors”). By accepting this
Preliminary Placement Document, each investor represents and warrants that if they receive this Preliminary
Placement Document in New Zealand they are a Habitual Investor and you will not disclose this Preliminary
Placement Document to any person who is not also a Habitual Investor.
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Qatar
The Equity Shares have not been offered, sold or delivered, and will not be offered, sold or delivered at any time,
directly or indirectly, in the State of Qatar in a manner that would constitute a public offering. The Preliminary
Placement Document has not been reviewed or registered with Qatari Government Authorities, whether under
Law No. 25 (2002) concerning investment funds, Central Bank resolution No. 15 (1997), as amended, or any
associated regulations. Therefore, the Preliminary Placement Document is strictly private and confidential, and
is being issued to a limited number of sophisticated investors, and may not be reproduced or used for any other
purposes, nor provided to any person other than recipient thereof.
The Capital Market Authority does not make any representation as to the accuracy or completeness of the
Preliminary Placement Document, and expressly disclaims any liability whatsoever for any loss arising from, or
incurred in reliance upon, any part of the Preliminary Placement Document. Prospective purchasers of the Equity
Shares offered hereby should conduct their own due diligence on the accuracy of the information relating to the
Equity Shares. If you do not understand the contents of the Preliminary Placement Document, you should consult
an authorised financial adviser.
Saudi Arabia
The offer and sale of the Equity Shares will only take place within the Kingdom of Saudi Arabia in accordance
with the capital market law, including the “Offer of Securities Regulations” issued thereunder. The Equity Shares
will be offered to investors in the Kingdom of Saudi Arabia pursuant to an “exempt offer” as defined in the Offer
of Securities Regulations. Prior to any offer of Equity Shares in the Kingdom of Saudi Arabia, the Capital Market
Authority will be notified of this offering in accordance with the offer of Securities Regulations. The Equity
Shares have not been and will not be approved or disapproved by the Capital Market Authority nor will the
Capital Market Authority comment upon the accuracy or adequacy of the Preliminary Placement Document.
Furthermore, the capital market authority takes no responsibility for the accuracy or adequacy of the information
contained in the Preliminary Placement Document.
Singapore
This Preliminary Placement Document has not been registered as a prospectus with the Monetary Authority of
Singapore. Accordingly, this Preliminary Placement Document and any other document or material in connection
with the offer or sale, or invitation for subscription or purchase, of the Equity Shares may not be circulated or
distributed, nor may the Equity Shares be offered or sold, or be made the subject of an invitation for subscription
or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor as
defined in Section 4A of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”) pursuant to
Section 274 of the SFA, (ii) to a relevant person as defined in Section 275(2) of the SFA, pursuant to Section
275(1) of the SFA, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified
in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other
applicable provision of the SFA.
Where the Equity Shares are subscribed or purchased pursuant to an offer made in reliance on Section 275 by a
relevant person which is: (a) a corporation (which is not an accredited investor as defined in Section 4A of the
SFA) the sole business of which is to hold investments and the entire share capital of which is owned by one or
more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited
investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor, the securities
(as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries’ rights and interest in that trust
shall not be transferable for six months after that corporation or that trust has acquired the Equity Shares under
Section 275 except: (1) to an institutional investor pursuant to Section 274 of the SFA or to a relevant person
pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance
with the conditions, specified in Section 275 of the SFA; (2) where no consideration is given for the transfer; (3)
by operation of law; (4) pursuant to Section 276(7) of the SFA or (5) as specified in Regulation 32 of the
Securities and Futures (Offer of Investments) (Shares and Debentures) Regulations 2005 of Singapore.
Switzerland
The Equity Shares may be offered in Switzerland on the basis of a private placement, not as a public offering.
The Equity Shares will neither be listed on the six Swiss Exchange nor are they subject to Swiss law. This
Preliminary Placement Document does not constitute a prospectus within the meaning of Art. 1156 of the Swiss
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Federal Code of Obligations or Arts. 32 et seq. of the Listing Rules of the six Swiss Exchange, and does not
comply with the Directive for Equity Shares of Foreign Borrowers of the Swiss Bankers Association. We will
not apply for a listing of the Equity Shares on any Swiss stock exchange or other Swiss regulated market and
this Preliminary Placement Document may not comply with the information required under the relevant listing
rules. The Equity Shares have not and will not be registered with the Swiss Federal Banking Commission or any
other Swiss authority for any purpose, whatsoever.
United Arab Emirates (excluding Dubai International Financial Centre)
The Equity Shares have not been, and are not being publicly offered, sold, promoted or advertised in the United
Arab Emirates (“U.A.E.”) other than in compliance with the laws of the U.A.E. Prospective investors in the
Dubai International Financial Centre should have regard to the specific notice to prospective investors in the
Dubai International Financial Centre set out above. The information contained in this Preliminary Placement
Document does not constitute a public offer of securities in the U.A.E. in accordance with the Commercial
Companies Law (Federal Law No. 8 of 1984 of the U.A.E., as amended) or otherwise and is not intended to be
a public offer.
The Company and the Equity Shares have not been approved or licensed by or registered with the Central Bank
of the United Arab Emirates, the Emirates Securities and Commodities Authority or any other relevant licensing
authorities or governmental agencies in the U.A.E. This Preliminary Placement Document has not been approved
by or filed with the Central Bank of the United Arab Emirates, the Emirates Securities and Commodities
Authority or the Dubai Financial Services Authority. This Preliminary Placement Document is being issued to a
limited number of selected institutional and sophisticated investors, is not for general circulation in the U.A.E.
and may not be provided to any person other than the original recipient or reproduced or used for any other
purpose. If you do not understand the contents of this Preliminary Placement Document, you should consult an
authorised financial adviser. This Preliminary Placement Document is provided for the benefit of the recipient
only, and should not be delivered to, or relied on by, any other person.
United Kingdom
The Book Running Lead Manager has represented and agreed that:
(i) it has only communicated or caused to be communicated and will only communicate or cause to be
communicated an invitation or inducement to engage in investment activity (within the meaning of Section
21 of the Financial Services and Markets Act 2000 (“FSMA”)) received by it in connection with the issue
or sale of the Equity Shares in circumstances in which Section 21(1) of the FSMA does not apply to the
Company; and
(ii) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done
by it in relation to the Equity Shares in, from or otherwise involving the United Kingdom.
No person may communicate or cause to be communicated any invitation or inducement to engage in any
investment activity (within the meaning of section 21 of FSMA) received by it in connection with this Offer or
sale of the Equity Shares other than in circumstances in which section 21(1) of FSMA does not apply to the
Company.
United States
The Equity Shares have not been and will not be registered under the U.S. Securities Act, and may not be offered
or sold within the United States except pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the U.S. Securities Act and applicable United States state securities laws. The Equity
Shares are being offered and sold only outside the United States in offshore transactions in reliance on Regulation
S and the applicable laws of each jurisdiction where such offers and sales occur. Each purchaser of the Equity
Shares offered by this Preliminary Placement Document will be deemed to have made the representations,
agreements and acknowledgements as described under “Transfer Restrictions” in this Preliminary Placement
Document.
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TRANSFER RESTRICTIONS
Allottees are not permitted to sell the Equity Shares for a period of one year from the date of Allotment except
through the Stock Exchanges. In addition to the above, allotments made to QIBs, including FVCIs, VCFs and
AIFs in the Issue, may be subject to lock-in requirements, if any, under the rules and regulations that are
applicable to them. Accordingly, purchasers are advised to consult their own legal counsel prior to making any
offer, re-sale, pledge or transfer of the Equity Shares.
Due to the following restrictions, investors are advised to consult legal counsel prior to making any resale, pledge
or transfer of the Equity Shares.
The Equity Shares have not been and will not be registered under the U.S. Securities Act and may not be offered
or sold within the United States except pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the U.S. Securities Act and applicable United States state securities laws. The Equity
Shares are being offered and sold only outside the United States in offshore transactions in reliance on Regulation
S, in each case in compliance with the applicable laws of the jurisdictions where those offers and sales occur.
If you purchase the Equity Shares in this Issue, by accepting delivery of this Preliminary Placement Document,
submitting a bid to purchase the Equity Shares and accepting delivery of the Equity Shares, you will be deemed
to have represented to and agreed with the Company and the Book Running Lead Manager as follows:

you will comply with all laws, regulations and restrictions (including the selling restrictions contained in this
Preliminary Placement Document) which may be applicable in your jurisdiction and you have obtained or
will obtain any consent, approval or authorization required for you to purchase and accept delivery of the
Equity Shares, and you acknowledge and agree that none of the Company, the Book Running Lead Manager
or any of their respective affiliates shall have any responsibility in this regard;

the Equity Shares have not been and will not be registered under the U.S. Securities Act, or with any securities
regulatory authority of any state of the United States, and are subject to restrictions on transfer;

you and the person, if any, for whose account or benefit you are acquiring the Equity Shares, were located
outside the United States at the time the buy order for the Equity Shares was originated and continue to be
located outside the United States and have not purchased the Equity Shares for the account or benefit of any
person in the United States or entered into any arrangement for the transfer of the Equity Shares or any
economic interest therein to any person in the United States;

you are not an affiliate (as defined in Rule 405 of the U.S. Securities Act) of our Company or a person acting
on behalf of such affiliate; and you are not in the business of buying and selling securities or, if you are in
such business, you did not acquire the Equity Shares from our Company or an affiliate (as defined in Rule
405 of the U.S. Securities Act) thereof in the initial distribution of the Equity Shares;

you are aware of the restrictions on the offer and sale of the Equity Shares pursuant to Regulation S described
in this Preliminary Placement Document and that neither the BSE nor the NSE is a “designated offshore
securities market” within the meaning of Regulation S of the U.S. Securities Act;

the Equity Shares have not been offered to you by means of any “directed selling efforts” as defined in
Regulation S; and
you acknowledge that our Company, the Book Running Lead Manager and their respective affiliates (as defined
in Rule 405 of the U.S. Securities Act), and others will rely upon the truth and accuracy of the foregoing
acknowledgements, representations and agreements and agrees that, if any of such acknowledgements,
representations and agreements deemed to have been made by virtue of its purchase of the Equity Shares are no
longer accurate, you will promptly notify our Company and the Book Running Lead Manager, and if you are
acquiring any of the Equity Shares as a fiduciary or agent for one or more accounts, you represent that you have
sole investment discretion with respect to each such account and that you have full power to make the foregoing
acknowledgements, representations and agreements on behalf of such accounts.
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THE SECURITIES MARKET OF INDIA
The information in this section has been extracted from documents available on the website of SEBI and the Stock
Exchange and has not been prepared or independently verified by our Company or the BRLM or any of its
respective affiliates or advisors.
The Indian Securities Market
India has a long history of organised securities trading. In 1875, the first stock exchange was established in
Mumbai. The BSE and the NSE are the significant stock exchanges in terms of the number of listed companies,
market capitalisation and trading activity.
Indian Stock Exchanges
Indian stock exchanges are regulated primarily by SEBI, as well as by the Government acting through the Ministry
of Finance, Capital Markets Division, under the Securities Contracts (Regulation) Act, 1956 (the “SCRA”) and
the Securities Contracts (Regulation) Rules, 1957 (the “SCRR”). On June 20, 2012, SEBI, in exercise of its
powers under the SCRA and the Securities and Exchange Board of India Act, 1992, as amended from time to time
(the “SEBI Act”), notified the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations)
Regulations, 2012 (the “SCR (SECC) Rules”), which regulate inter alia the recognition, ownership and internal
governance of stock exchanges and clearing corporations in India together with providing for minimum
capitalisation requirements for stock exchanges. The SCRA, the SCRR and the SCR (SECC) Rules along with
various rules, bye-laws and regulations of the respective stock exchanges, regulate the recognition of stock
exchanges, the qualifications for membership thereof and the manner, in which contracts are entered into, settled
and enforced between members of the stock exchanges.
The SEBI Act empowers SEBI to regulate the Indian securities markets, including stock exchanges and
intermediaries in the capital markets, promote and monitor self-regulatory organisations and prohibit fraudulent
and unfair trade practices. Regulations and guidelines concerning minimum disclosure requirements by public
companies, investor protection, insider trading, substantial acquisitions of shares and takeover of companies, buybacks of securities, employee stock option schemes, stockbrokers, merchant bankers, underwriters, mutual funds,
FIIs, FPIs, credit rating agencies and other capital market participants have been notified by the relevant regulatory
authority.
Listing of Securities
The listing of securities on a recognised Indian stock exchange is regulated by the applicable Indian laws including
the Companies Act, the SCRA, the SCRR, the SEBI Act and various guidelines and regulations issued by SEBI
and the Listing Regulations. The SCRA empowers the governing body of each recognised stock exchange to
suspend trading of or withdraw admission to dealings in a listed security for breach of or non-compliance with
any conditions or breach of a company’s obligations under the Listing Regulations or for any reason, subject to
the issuer receiving prior written notice of the intent of the exchange and upon granting of a hearing in the matter.
SEBI also has the power to amend the Listing Regulations and bye-laws of the stock exchanges in India, to
overrule a stock exchange’s governing body and withdraw recognition of a recognised stock exchange.
All listed companies are required to ensure a minimum public shareholding at 25%. Further, where the public
shareholding in a listed company falls below 25% at any time, such company is required to bring the public
shareholding to 25% within a maximum period of 12 months from the date of such fall. Consequently, a listed
company may be delisted from the stock exchanges for not complying with the above-mentioned requirement.
Our Company is in compliance with this minimum public shareholding requirement.
Delisting
SEBI has notified the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009 in
relation to the voluntary and compulsory delisting of equity shares from the stock exchanges which were
significantly modified in 2015. In addition, certain amendments to the SCRR have also been notified in relation
to delisting.
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Index-Based Market-Wide Circuit Breaker System
In order to restrict abnormal price volatility in any particular stock, SEBI has instructed stock exchanges to apply
daily circuit breakers which do not allow transactions beyond a certain level of price volatility. The index based
market-wide circuit breaker system (equity and equity derivatives) applies at three stages of the index movement,
at 10%, 15% and 20%. These circuit breakers, when triggered, bring about a co-ordinated trading halt in all equity
and equity derivative markets nationwide. The market-wide circuit breakers are triggered by movement of either
the SENSEX of the BSE or the S&P CNX NIFTY of the NSE, whichever is breached earlier.
In addition to the market-wide index-based circuit breakers, there are currently in place individual scrip-wise price
bands of up to 20% movements either up or down. However, no price bands are applicable on scrips on which
derivative products are available or scrips included in indices on which derivative products are available.
The stock exchanges in India can also exercise the power to suspend trading during periods of market volatility.
Margin requirements are imposed by stock exchanges that are required to be paid by the stockbrokers.
BSE
Established in 1875, the BSE is the oldest stock exchange in India. In 1956, it became the first stock exchange in
India to obtain permanent recognition from the Government under the SCRA.
NSE
The NSE was established by financial institutions and banks to provide nationwide online, satellite-linked, screenbased trading facilities with market-makers and electronic clearing and settlement for securities including
government securities, debentures, public sector bonds and units. The NSE was recognised as a stock exchange
under the SCRA in April 1993 and commenced operations in the wholesale debt market segment in June 1994.
The capital market (equities) segment commenced operations in November 1994 and operations in the derivatives
segment commenced in June 2000.
Internet-based Securities Trading and Services
Internet trading takes place through order routing systems, which route client orders to exchange trading systems
for execution. Stockbrokers interested in providing this service are required to apply for permission to the relevant
stock exchange and also have to comply with certain minimum conditions stipulated under applicable law. The
NSE became the first exchange to grant approval to its members for providing internet based trading services.
Internet trading is possible on both the “equities” as well as the “derivatives” segments of the NSE. The NSE
became the first exchange to grant approval to its members for providing internet-based trading services. Internet
trading is possible on both the “equities” and the “derivatives” segments of the NSE.
Trading Hours
Trading on both the NSE and the BSE occurs from Monday to Friday, between 9:15 a.m. and 3:30 p.m. IST
(excluding the 15 minutes pre-open session from 9:00 a.m. to 9:15 a.m.). The BSE and the NSE are closed on
public holidays. The recognised stock exchanges have been permitted to set their own trading hours (in the cash
and derivatives segments) subject to the condition that (i) the trading hours are between 9.00 a.m. and 5.00 p.m.;
and (ii) the stock exchange has in place a risk management system and infrastructure commensurate to the trading
hours.
Trading Procedure
In order to facilitate smooth transactions, the BSE replaced its open outcry system with BSE On-line Trading (or
“BOLT”) facility in 1995. This totally automated screen based trading in securities was put into practice
nationwide. This has enhanced transparency in dealings and has assisted considerably in smoothening settlement
cycles and improving efficiency in back-office work.
The NSE has introduced a fully automated trading system called National Exchange for Automated Trading (or
“NEAT”), which operates on strict time/price priority besides enabling efficient trade. NEAT has provided depth
in the market by enabling large number of members all over India to trade simultaneously, narrowing the spreads.
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Takeover Regulations
Disclosure and mandatory bid obligations for listed Indian companies under Indian law are governed by the
Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, as
amended (“Takeover Regulations”), which provides specific regulations in relation to substantial acquisition of
shares and takeover. The Takeover Regulations came into effect on October 22, 2011 and replaced the Securities
and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (“Takeover
Code 1997”). Once the equity shares of a company are listed on a stock exchange in India, the provisions of the
Takeover Regulations will apply to any acquisition of the company’s shares/voting rights/control. The Takeover
Regulations prescribe certain thresholds or trigger points in the shareholding a person or entity has in the listed
Indian company, which give rise to certain obligations on part of the acquirer. Acquisitions up to a certain
threshold prescribed under the Takeover Regulations mandate specific disclosure requirements, while acquisitions
crossing particular thresholds may result in the acquirer having to make an open offer of the shares of the target
company. The Takeover Regulations also provides for the possibility of indirect acquisitions, imposing specific
obligations on the acquirer in case of such indirect acquisition.
The key changes from the Takeover Code 1997 under the Takeover Code include:

the trigger for making a public offer upon acquisition of shares or voting rights has been increased from
15% to 25%;

every public offer has to be made for at least 26% of all the shares held by other shareholders;

creeping acquisition of up to 5% is permitted up to a limit of 75% of the shares or voting rights of a
company;

acquisition of control in a target company triggers the requirement to make a public offer regardless of
the level of shareholding and the acquisition of shares; and

if the indirect acquisition of a target company is a predominant part of the business or entity being
acquired, it would be treated as a direct acquisition.
Insider Trading Regulations
The SEBI (Prohibition of Insider Trading) Regulations, 2015 have been notified by SEBI to prohibit and penalise
insider trading in India. An insider is, among other things, prohibited from dealing either on his own behalf or on
behalf of any other person, in the securities of a listed company or a company proposed to be listed when in
possession of unpublished price sensitive information.
The Insider Trading Regulations also provide disclosure obligations for shareholders holding more than a
predefined percentage, and directors and officers, with respect to their shareholding in the company, and the
changes therein. The definition of “insider” includes any person who has received or has had access to unpublished
price sensitive information in relation to securities of a company or any person who has a connection with the
company that is expected to put him in possession of unpublished price sensitive information.
Depositories
The Depositories Act provides a legal framework for the establishment of depositories to record ownership details
and effect transfers in book-entry form. Further, SEBI framed regulations in relation to, among other things, the
formation and registration of such depositories, the registration of participants as well as the rights and obligations
of the depositories, participants, companies and beneficial owners. The depository system has significantly
improved the operation of the Indian securities markets.
Derivatives (Futures and Options)
Trading in derivatives is governed by the SCRA, the SCRR and the SEBI Act. The SCRA was amended in
February 2000 and derivatives contracts were included within the term “securities”, as defined by the SCRA.
Trading in derivatives in India takes place either on separate and independent derivatives exchanges or on a
separate segment of an existing stock exchange. The derivatives exchange or derivatives segment of a stock
exchange functions as a self-regulatory organisation under the supervision of the SEBI.
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DESCRIPTION OF EQUITY SHARES
The following is information relating to the Equity Shares including a brief summary of the Memorandum of
Association and Articles of Association, and the provisions of the Companies Act, 2013. Prospective investors are
urged to read the Memorandum of Association and Articles of Association carefully, and consult with their
advisers, as the Memorandum of Association and Articles of Association and applicable Indian law, and not this
summary, govern the rights attached to the Equity Shares.
Share Capital
As at March 31, 2016, our Company’s authorised Share Capital is Rs.15,00,00,000 divided into 15,00,00,000
Equity Shares of Rs.1 each and the issued subscribed and paid up share capital is Rs. 9,66,65,830 divided into
9,66,65,830 Equity Shares of Re. 1 each. For further details on our Company’s share capital, see “Capital
Structure” on page 57.
Dividends
Under Indian law, a company pays final dividend upon a recommendation by its board of directors and approval
by a majority of the shareholders at the AGM of shareholders held each financial year. Under the Companies Act,
2013 unless the board of directors of a company recommends the payment of final dividend, the shareholders at
a general meeting have no power to declare any dividend. Subject to certain conditions specified under Section
123 of the Companies Act, 2013 and the rules made thereunder no dividend can be declared or paid by a company
for any financial year except (a) out of the profits of the company for that year, calculated in accordance with the
provisions of the Companies Act, 2013; or (b) out of the profits of the company for any previous financial year(s)
arrived at in accordance with the Companies Act, 2013 and remaining undistributed; or (c) out of both; or (d) out
of money provided by the Central Government or a state Government for payment of dividend by the Company
in pursuance of a guarantee given by that Government.
The profits of our Company, subject to provisions of the Articles of Association, shall be divisible among the
members in proportion of the amount of capital paid up on the shares held by them respectively.
Our Board may retain any dividends on which our Company may have a lien and may apply the same towards the
satisfaction of the debts or liabilities in respect of which the lien exists. Our Board may deduct from any dividend
payable to any member all sums of money, if any, payable by him to the Company on account of calls or otherwise
in relation to the Equity Shares of the Company. All dividends shall be apportioned and paid proportionately to
the amounts paid or credited as paid on the Equity Shares during any portion or portions of the period in respect
of which the dividend is paid but if any Equity Share is issued on terms providing that it shall rank for dividends
as from a particular date, such Equity Share shall rank for dividend accordingly. Our Board may deduct from any
dividend payable to any member all sums of money, if any, payable by him to the Company on account of calls
or otherwise in relation to the Equity Shares of the Company. No member shall be entitled to receive payment of
interest and dividend in respect of his Equity Shares while any money may be due or owing from him to our
Company and our Board may deduct from the interest or dividend to any member all such sums of money so due
from him to our Company. A transfer of Equity Shares shall not pass the right to any dividend declared therein
before the registration of the transfer unless the registered holder of the Equity Shares authorises the Company to
pay the dividend to the transferee.
Any one of two or more joint holders of a share may give effective receipts for any dividends, bonuses or other
monies payable in respect of such share.
The Memorandum and Articles of Association provide that our Company in its general meeting may declare
dividends to be paid to the members according to their respective rights and interest in the profits. The dividend
shall not exceed the amount recommended by our Board. Further, our Board may from time to time pay the
member’s interim dividend as may appear to them to be justified. No dividend shall bear interest against the
Company.
Capitalisation of Reserves and Issue of Bonus Shares
In addition to permitting dividends to be paid out of current or retained earnings as described above, the
Companies Act, 2013 permits the board of directors, if so approved by the shareholders in a general meeting, to
capitalise the company’s profits or reserves for the purpose of issuing fully paid-up bonus shares, which are similar
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to stock dividend. The Companies Act, 2013 permits the issue of fully paid up bonus shares from its free reserves,
securities premium account or capital redemption reserve account, provided that bonus shares shall not be issued
by capitalizing reserves created by revaluation of assets. These bonus Equity Shares must be distributed to
shareholders in proportion to the number of Equity Shares owned by them as recommended by the board of
directors.
Any issue of bonus shares by a listed company would be subject to the SEBI ICDR Regulations. The relevant
SEBI ICDR Regulations prescribe that no company shall make a bonus issue of equity shares if it has outstanding
fully or partly convertible debt instruments at the time of making the bonus issue, unless it has made reservation
of the equity shares in the same class in favour of the holders of the outstanding convertible debt instruments in
proportion to the convertible part thereof and the equity shares reserved for the holders of fully or partly
convertible debt instruments shall be issued at the time of conversion of such convertible debt instruments on the
same terms or same proportion on which the bonds were issued. Further, for issuance of such bonus shares, a
company should not have defaulted in the payment of interest or principal in respect of fixed deposits and interest
on existing debentures or principal on redemption of such debentures. The declaration of bonus shares in lieu of
a dividend cannot be made. The bonus issuance shall be made out of free reserves built out of genuine profits or
share premium collected in cash only. The reserves created by revaluation of fixed assets cannot be capitalised.
Further, a company should have sufficient reason to believe that it has not defaulted in respect of the payment of
statutory dues of the employees, such as contributions to provident funds, gratuities and/or bonuses.
Our Board may, before recommending any dividend, set aside out of the profits of the Company such sums as it
thinks fit as a reserve or reserves. Such reserves shall, at the discretion of the Board, be applicable for any purpose
to which the profits of the Company may be properly applied, including provision for meeting contingencies or
for equalizing dividends. Such reserves may also, at the discretion of the Board, either be employed in the business
of the Company or be invested in such investments (other than shares of the Company) as the Board may, from
time to time, think fit.
Our Company may by a resolution passed in a general meeting of the shareholders, upon a recommendation by
the Board, resolve to capitalise whole or any part of the amount for the time being standing to the credit of any of
our Company’s reserve accounts or to the credit of the profit and loss account or otherwise available for
distribution and distribute amongst such of the shareholders as would be entitled to receive the same if distributed
by way of dividend and in the same proportions and that all or any part of such capitalised fund shall be applied
on behalf of such shareholders in paying up any amounts for the time being unpaid on any Equity Shares held by
such Shareholders and/or in paying up in full, unissued shares of our Company to be allotted and distributed,
credited as fully paid up in the proportion aforesaid, provided that a share premium account and a capital
redemption reserve fund may, for the purposes of the Article, be applied in the paying of any unissued shares to
be issued to members of our Company as fully paid bonus shares.
Alteration of Share Capital
Subject to the provisions of the Companies Act, 2013, our Company may increase its share capital by issuing new
shares on such terms and with such rights as it, by action of its shareholders in a general meeting may determine.
According to Section 62(1)(a) of the Companies Act, 2013 such new shares shall be offered to existing
shareholders in proportion to the paid up share capital on those shares at that date. The offer shall be made by
notice specifying the number of shares offered and the date (being not less than 15 days and not exceeding 30
days from the date of the offer) within which the offer, if not accepted, will be deemed to have been declined.
After such date or on receipt of earlier intimation from the persons to whom such notice is given that they decline
to accept the shares offered, the Board may dispose of the shares offered in respect of which no acceptance has
been received in a manner which shall not be disadvantageous to the shareholders of our Company. The offer is
deemed to include a right exercisable by the person concerned to renounce the shares offered to him in favour of
any other person. Private placement and public issues shall be undertaken pursuant to Chapter III the Companies
Act, 2013.
Under the provisions of Section 62(1)(c) of the Companies Act, 2013 and the Companies (Share Capital and
Debentures) Rules, 2014, new shares may be offered to any persons whether or not those persons include existing
shareholders or employees to whom shares are allotted under a scheme of employees stock options, either for cash
or for consideration other than cash, if a special resolution to that effect is passed by our Company’s shareholders
in a general meeting. Our Company may, by a resolution passed in a general meeting, from time to time, increase
the share capital by the creation of new Equity Shares of such amount as may be deemed expedient and specified
in the resolution. Such increase in the share capital shall be subject to compliance with the provision of the
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Companies Act, 2013 and of any other laws that may be in force. New Equity Shares shall be issued upon such
terms and conditions and with such rights and privileges attached thereto as are consistent with provisions of the
Companies Act, 2013 and which the general meeting, resolving upon the creation thereof shall direct and if no
direction be given, as our Board shall determine, and in particular such Equity Shares may be issued with a
preferential or qualified right to dividends and in the distribution of assets of our Company, subject to the
conditions prescribed under the Companies Act, 2013.
Our Company may by ordinary resolution taken in a general meeting of shareholders:
(i)
increase its authorised share capital by such amount as it thinks expedient;
(ii)
consolidate and divide its share capital into shares of larger amount than its existing Equity Shares;
(iii)
convert all or any of its fully paid-up Equity Shares into stock, and reconvert that stock into fully paidup shares of any denomination;
(iv)
sub-divide its existing Equity Shares or any of them into shares of smaller amount than is fixed by the
Memorandum of Association, nevertheless, subject to the provisions of Section 61 of the Act;
(v)
Cancel Equity Shares which, at the date of the passing of the resolution in that behalf, have not been
taken or agreed to be taken by any person, and diminish the amount of its share capital by the amount of
the Equity Shares so cancelled; or
(vi)
Classify Equity Shares which may determine that as between the holders of the Equity Shares resulting
from such classification, one or more of such Equity Shares shall have some preference or special
advantage over others as regards dividend, capital, voting rights, or otherwise, subject to the provisions
of sections 43, 47 and 48 of the Act.
Further, our Company may, from time to time, by special resolution taken in a general meeting of shareholders,
reduce its share capital, any capital redemption reserve account or any share premium account in any manner,
subject to any incident authorised and consent required by law.
General Meetings of Shareholders
Every year our Company is required to hold an annual general meeting in addition to any other meetings. Further,
our Board may, whenever it thinks fit, call an extraordinary general meeting and shall, on the requisition of a
number of shareholders who constitute not less than one-tenth of the paid-up capital of our Company, proceed to
call an extraordinary general meeting. Not less than 21 days’ clear notice in writing of the general meeting is to
be given, but shorter notice may be given if consent in writing is accorded by all the shareholders entitled to vote
and in case of any other meetings, with the consent of shareholders holding not less than 95 per cent of such part
of the paid-up Share capital of our Company which gives a right to vote at the meeting. An explanatory statement
shall be annexed to every notice of a general meeting and notice of every meeting of the Company shall be given
to every member of the Company, to the auditors of the Company, to any legal representative of any deceased
member or assignee of any insolvent member, and every director of the Company in accordance with Section 101
of the Companies Act, 2013. The accidental omission to give any such notice to or its non-receipt by any member
or other person to whom it should be given shall not invalidate the proceedings of the meeting. The quorum
requirements for a general meeting are as prescribed under Section 103 of the Companies Act, 2013, and no
business is to be transacted at the general meeting unless the requisite quorum is present at the commencement of
the same. If the quorum is not present within half an hour of the time appointed for a meeting, the meeting, if
convened upon such requisition as aforesaid, shall be dissolved; but in any other case it shall stand adjourned to
the same day in the next week at the same time and place, or such other day and at such time and place as the
Board may by notice appoint. The Articles of Association further provide that no business shall be transacted at
any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took
place.
A resolution put to vote at a meeting of the shareholders shall be decided by a show of hands unless the voting is
carried out electronically or a poll has been demanded under Section 109 of the Companies Act, 2013.
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Voting Rights
Subject to the provisions of the Companies Act, 2013 and the Memorandum and Articles of Association, votes
may be given either personally or by proxy, or in the case of a body corporate, by a duly authorised representative
under Section 113 of the Companies Act, 2013.
Every member present in person shall have one vote on a show of hands, and on poll, the member present in
person or by proxy shall have one vote for each Equity Share of our Company held by him, subject to any rights
or restrictions for the time being attached to any class or classes of Equity Shares. Further, in terms of Companies
(Management and Administration) Rules, 2014, a member shall have the right to exercise its vote at any general
meeting by electronic means.
No member shall be entitled to exercise any voting rights either personally or by proxy at any meeting of the
Company in respect of any shares registered in his name on which any calls or other sums presently payable by
him have not been paid or regard to which the Company has exercised any right of lien.
The instrument appointing a proxy is required to be lodged at the registered office at least 48 hours before the
time of the meeting. No proxy shall be entitled to vote on a show of hands unless such proxy is present on behalf
of a company or corporation. A vote given in accordance with the terms of an instrument appointing a proxy shall
be valid notwithstanding the previous death or insanity of the principal or revocation of the instrument or transfer
of the Equity Share in respect of which the vote is given provided no intimation in writing of the death or insanity,
revocation or transfer shall have been received at the office of our Company before the general meeting. Provided
that the chairman of any general meeting shall be entitled to require such evidence as he may in his discretion
think fit of the due execution of an instrument of proxy and that the same has not been revoked. A person can act
as proxy on behalf of the members not exceeding 50 and holding in aggregate not more than 10% of the total
share capital of the Company carrying voting rights.
Ordinary resolutions may be passed by simple majority of those present and voting. Special resolutions require
that the votes cast in favour of the resolution must be at least three times the votes cast against the resolution. The
Companies Act, 2013 provides that to amend the Articles of Association a special resolution is required to be
passed in a general meeting.
Directors
The Articles of Association provide that the number of Directors shall be not less than three and not more than
fifteen. The Directors shall be appointed by our Company in the general meeting subject to the provisions of the
Companies Act, 2013 and the Articles of Association. The Directors to retire by rotation at every annual general
meeting shall be those who have been longest in office since their last appointment but as between persons who
became Directors on the same day those to retire shall in default of being subject to any agreement among
themselves, be determined by lot.
The Directors have the power to appoint any other persons as an additional Director on our Board but any Director
so appointed shall hold office only up to the date of the next following annual general meeting of our Company
and the total number of Directors shall not at any time exceed the maximum strength prescribed under the Articles
of Association. Our Board shall also have the power to appoint any person to act as an alternate Director for a
Director during the latter's absence for a period of not less than three months from India.
In terms of the Companies Act, 2013, our Board is required to meet at least four times in a year not exceeding
more than 120 days between two meetings, for the dispatch of business, adjourn and otherwise regulate its
meetings and proceedings as it thinks fit. The quorum for a meeting of our Board is one-third of the total number
of Directors (any fraction contained in that one-third being rounded off as one) or two Directors, whichever is
higher.
Transfer of Equity Shares
An application for registration of a transfer of the Equity Shares in our Company may be made either by the
transferor or the transferee. Where the application is made by the transferor and relates to partially paid Equity
Shares, the transfer shall not be registered unless our Company gives notice of the application to the transferee
and the transferee makes no objection to the transfer within two weeks from the receipt of the notice. No fee may
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be charged for registration of transfer of Equity Shares. Shares held through depositories are transferred in the
form of book entries or in electronic form in accordance with the regulations laid down by SEBI.
Our Company is required to comply with the rules, regulations and requirements of the BSE Limited or the rules
made under the Companies Act, 2013 or the rules made under the Securities Contracts (Regulation) Act, 1956, as
amended (“SCRA”), or any other law or rules applicable, relating to the transfer or transmission of Equity Shares.
Buy-back
Our Company may buy back its own Equity Shares or other specified securities subject to the provisions of the
Companies Act, 2013 and any related SEBI guidelines issued in connection therewith.
Liquidation Rights
In the event that our Company is wound up, the holders of Equity Shares shall be entitled to have the assets
available for distribution amongst the members so that the losses shall be borne by the holders of the Equity Shares
as nearly as may be in proportion to the capital paid up or which ought to have been paid up at the commencement
of the winding up on the Equity Shares held by them. If the assets available for distribution are more than sufficient
to repay the whole of the paid-up capital at the commencement of the winding up, the surplus shall be distributed
amongst the holders of Equity Shares in proportion to the capital paid up or which ought to have been paid up at
the commencement of the winding up.
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INDEPENDENT AUDITORS
Our Company’s Audited Consolidated Financial Statements and notes thereto have been included in this
Preliminary Placement Document. Our Financial Statements are prepared in accordance with Indian GAAP as
applicable to us.
B. K. Khare & Co., our statutory auditors, have audited our Audited Consolidated Financial Statements which
have been included in this Preliminary Placement Document.
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STATEMENT OF TAX BENEFITS
STATEMENT OF POSSIBLE TAX BENEFITS AVAILABLE TO THE COMPANY (INCLUDING ITS
RELEVANT SUBSIDIARIES AS APPLICABLE) AND ITS SHAREHOLDERS UNDER THE
APPLICABLE LAWS IN INDIA
To
The Board of Directors
Camlin Fine Sciences Limited
Plot No F/11 AND F/12, WICEL,
Opposite SEEPZ Main Gate,
Central Road,
Andheri (East)
Mumbai 400 093
Dear Sirs,
Subject: Statement of Possible Tax Benefits available to the Company and its Shareholders prepared in
accordance with the requirement in Schedule VIII – Part A, Clause (VII)(L) of the Securities and
Exchange Board of India (Issue of Capital Disclosure Requirements) Regulations, 2009, as
amended
We hereby report that the enclosed annexure, prepared by Camlin Fine Sciences Limited (CIN:
L74100MH1993PLC075361) (the “Company”) states the possible tax benefits available to the Company and to
the shareholders of the Company under the provisions of the Income-tax Act, 1961 (‘the Act’) as amended by the
Finance Act, 2016 (i.e. applicable for financial year 2016-17, relevant to the assessment year 2017-18) presently
in force in India as on the signing date. The benefits as stated are dependent on the Company or its shareholders
fulfilling the conditions prescribed under the relevant provisions of the Act failing which the stated benefits may
be wholly or partially denied.
The benefits discussed in the enclosed Annexure are not exhaustive. Further, the presentation of this Statement of
Possible Tax Benefits is the responsibility of the Management. This statement is only intended to provide general
information to the investors and is neither designed nor intended to be a substitute for professional tax advice. A
shareholder is advised to consult his/ her/ their own tax consultant with respect to the tax implications arising out
of their participation in the proposed Qualified Institutional Placement of Equity Shares of the Company
particularly in view of case specific nature of the tax consequences and the changing tax laws in India.
We do not express any opinion or provide any assurance as to whether:
(a) The Company or its shareholders will continue to obtain these benefits in future; or
(b) The conditions prescribed for availing the benefits have been / would be met.
(c) The revenue authorities / courts will concur with the views expressed herein.
Our views are based on the existing provisions of law and its interpretation, which are subject to change from time
to time. We do not assume responsibility to update the views consequent to such changes. We shall not be liable
to the Company or any other person for any claims, liabilities or expenses whatsoever relating to this Statement.
The contents of the enclosed Annexure are based on information, explanations and representations obtained from
the Company and on the basis of our understanding of the business activities and operations of the Company and
the provisions of the tax regulations stated above, as of date.
137
The enclosed Annexure is intended solely for your information and for the inclusion in the Preliminary Placement
Document, Placement Document and any other material issued by the Company, in connection with the proposed
Qualified Institutional Placement of the Company and is not to be used, referred to or distributed for any other
purpose without our prior written consent.
For B. K. Khare & Co.
Chartered Accountants
Firm Registration No. 105102W
Himanshu Chapsey
Partner
Membership No. 105731
Mumbai, June 28, 2016
138
ANNEXURE TO THE STATEMENT OF POSSIBLE TAX BENEFITS AVAILABLE TO THE
COMPANY AND ITS SHAREHOLDERS UNDER THE APPLICABLE DIRECT TAX LAWS IN INDIA
The information provided below sets out the possible tax benefits available to the shareholders of the Company,
in a summary manner only, under the direct tax laws presently in force in India (i.e. applicable for Financial Year
(‘FY’) 2016-17 relevant to the assessment year (‘AY’) 2017-18). Several of these benefits are dependent on the
Company or its shareholders fulfilling the conditions prescribed under the applicable regulations. Hence, the
ability of the Company or its shareholders to derive the possible tax benefits is linked to the fulfilment of such
conditions.
This is not a complete analysis or listing of all potential tax consequences of the subscription, ownership and
disposal of equity shares, under the current tax laws presently in force (as on date of this Report) in India. The
following overview is not exhaustive or comprehensive and is not intended to be a substitute for professional
advice.
INVESTORS ARE ADVISED TO CONSULT THEIR OWN TAX CONSULTANT WITH RESPECT TO
THE TAX IMPLICATIONS OF AN INVESTMENT IN THE SHARES PARTICULARLY IN VIEW OF
THE FACT THAT CERTAIN RECENTLY ENACTED LEGISLATION MAY NOT HAVE A DIRECT
LEGAL PRECEDENT OR MAY HAVE A DIFFERENT INTERPRETATION ON THE BENEFITS,
WHICH AN INVESTOR CAN AVAIL.
A. UNDER THE INCOME TAX ACT, 1961 (‘THE ACT’)
1.
Levy of Income-tax
Levy of income-tax and provisions under the Act are dependent on the residential status of the tax payer. The
provisions relevant for determination of the residential status of a tax payer are summarized herein below:
1.1 Residential status
Under the Act, “Non-Resident” means a person who is not a resident in India.
1.1.1 Residential status of an individual
As per the provisions of the Act, an individual is considered to be a resident in India during any FY if
he or she is present in India for:
(a) a period or periods aggregating to 182 days or more in that FY; or
(b) a period or periods aggregating to 60 days or more in that FY and for a period or periods
aggregating to 365 days or more within the four preceding years; or
In the case of a citizen of India or a person of Indian origin living outside India who comes on a visit
to India in any previous year, the limit of 60 days under point (b) above shall be read as 182 days.
In the case of a citizen of India who leaves India as member of the crew of an Indian ship in any
previous year, the limit of 60 days under point (b) above, shall be read as 182 days.
Further if an individual fulfills the conditions prescribed under Section 6(6) of the Act, he/she shall be
regarded as ‘Resident but not ordinarily resident’.
1.1.2 Residential status of a Company
A Company is resident in India if it is formed and incorporated under the Companies Act, 1956/2013
or the place of effective management, in that year, is situated in India.
139
For this purpose, the place of effective management (POEM) means a place where key management
and commercial decisions that are necessary for the conduct of the business of an entity as a whole are,
in substance made. For this purpose, the Central Board of Direct Taxes, Government of India (CBDT),
for the benefit of the taxpayers as well as tax administration, is in the process of issuing a set of guiding
principles to be followed in determination of POEM.
1.1.3 Residential status of a Hindu undivided family (‘HUF’), firm or AOP –
A HUF, firm or other association of persons or every other person is resident in India except where,
during that year, the control and management of its affairs is situated wholly outside India.
1.1.4 Residential status of every other person
Every other person is resident in India in a FY, in every case, except where the control and management
of his affairs is situated wholly outside India.
1.2 Scope of taxation
In general, a person who is "resident'' in India in a FY is subject to tax in India on its global income. In the
case of a person who is "non-resident'' in India, only the income that is received or deemed to be received
or that accrues or is deemed to accrue or arise to such person in India, is subject to tax in India.
Income earned from the equity shares of the Company would be considered to accrue or arise in India, and
would be taxable in the hands of all categories of tax payers irrespective of their residential status unless
specifically exempt (e.g. Dividend). However, a relief may be available under applicable Double Taxation
Avoidance Agreement (‘DTAA’) to certain non-residents/ investors.
2
Benefits available to the Company:
2.1 Taxability of Business Income:
Business income of the Company shall be computed in accordance with the provisions contained in Sections
30 to 43D of the Act.
Special Tax Benefit available to the Company
2.1.1
Deduction of expenditure on Scientific Research
Under Section 35(1)(i) and Section 35(1)(iv) of the Act, the Company is eligible for deduction in
respect of any revenue and capital expenditure (other than expenditure on the acquisition of any
land) respectively incurred on scientific research related to its business.
Under Section 35(2AB) of the Act, a company engaged in the business of manufacture or production
of any article or thing, not being an article or thing specified in the list of the Eleventh Schedule to
the Act, incurring any expenditure on scientific research (not being expenditure in the nature of cost
of any land and building) on in-house research and development facility as approved by the
Department of Scientific and Industrial Research (‘DSIR’), is entitled to a deduction of two times of
the expenditure so incurred.
The in-house R & D units of CFSL are registered and approved by DSIR authorities and the said
approval are valid till March 31, 2019. In view of the above, the Company is entitled to claim
weighted deduction on the expenditure on scientific research, subject to fulfillment of other
conditions laid down under Section 35(2AB) of the Act and guidelines issued by DSIR authorities.
It may be noted that this weighted deduction will be restricted to one and half times of the
expenditure from FY ended March 31, 2018 and further restricted to an amount equal to the
expenditure incurred from FY ended March 31, 2021.
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General Tax Benefits available to the Company
2.1.2
Depreciation Allowance:
Under Section 32(1) of the Act, the Company can claim depreciation allowance at the prescribed rates in
respect of the following assets owned by it and used for the purpose of its business:


Tangible assets being building, machinery, plant or furniture;
Intangible assets being know-how, patents, copyrights, trademarks, licences, franchises or any other
business or commercial rights of similar nature acquired on or after April 1, 1998.
Further, in case the assets are put to use for less than 180 days in the year of acquisition, then deprecation
would be calculated at the rate of 50% of applicable rate.
As per Section 32(1)(iia) of the Act, the Company is entitled to claim additional depreciation at the rate
of 20% of the actual cost of any new machinery or plant acquired and installed after March 31, 2005.
The first proviso to Section 32(1)(iia) of the Act entitles a company to claim additional depreciation at
the rate of 35% where it sets up an undertaking for manufacture of any article or thing in any notified
backward area in Andhra Pradesh or Bihar or Telangana or West Bengal, after April 1, 2015 but before
April 1, 2020. However, no deduction is allowed in respect of:
(a) Ships and Aircraft;
(b) Any machinery or plant which, before its installation by the company, was used either within or
outside India by any other person;
(c) Any machinery or plant installed in any office premises or any residential accommodation, including
accommodation in the nature of a guest-house;
(d) Any office appliances or road transport vehicles; or
(e) Any machinery or plant, the whole of the actual cost of which is allowed as a deduction (whether as
depreciation or otherwise) in computing the income under the head ‘Profits and gains from business
and profession’ of any one FY.
Further, in case the assets are put to use for less than 180 days in the year of acquisition, then deprecation
would be 50% of the cost of acquisition in the first year and the balance 50% would be available in the
immediately succeeding previous year.
2.1.3
Investment in new plant and machinery:
As per Section 32AC(1A) of the Act, the Company is entitled to a deduction of 15% of actual cost of
‘new assets’ acquired and installed in a FY subject to the fact that the aggregate amount of actual cost of
such new assets should exceed Rs. 25 crores. No deduction under Section 32AC(1A) of the Act would
be available from FY 2017-18 onwards.
Further, in case the new asset acquired or and installed is transferred by the Company, except in
connection with amalgamation/demerger, within 5 years from the date of its installation, the amount of
deduction allowed under Section 32AC(1A) of the Act, would be deemed to be income under the head
‘Profits and Gains from business or profession’ of the year in which such new asset is sold or otherwise
transferred. This tax treatment is in addition to the taxability of gains arising on transfer of new asset.
The term ‘new asset’ means any new plant and machinery but does not include:
 Ships and Aircraft;
 Any machinery or plant which, before its installation by the company, was used either within or
outside India by any other person;
 Any machinery or plant installed in any office premises or any residential accommodation, including
accommodation in the nature of a guest-house;
 Any office appliances including computers or computer software
 Any vehicle; or
 Any machinery or plant, the whole of the actual cost of which is allowed as a deduction (whether as
depreciation or otherwise) in computing the income under the head ‘Profits and gains from business
and profession’ of any one FY.
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2.1.4
Carry forward of unabsorbed depreciation, unabsorbed business losses
Under Section 32(2) of the Act, the Company can carry forward and set off unabsorbed depreciation of
one FY and adjust against any source of income of subsequent years.
Under Section 72 of the Act, unabsorbed business loss (other than from speculation), if any can be carried
forward and set off against business profits of subsequent years (up to 8 consecutive years) subject to
prescribed conditions. However, as per Section 80 of the Act, the unabsorbed business loss can be carried
forward only when the return of income has been filed within the time prescribed under Section 139(1)
of the Act.
Under Section 72A of the Act, pursuant to business re-organizations such as amalgamation, demerger,
etc., the successor company shall be allowed to carry forward any accumulated tax losses/unabsorbed
depreciation of the predecessor company subject to fulfillment of prescribed conditions.
2.1.5
2.1.6
Other Benefits
1.
As per the provisions of Section 35D of the Act, any specified preliminary expenditure incurred by
an Indian company before the commencement of its business or after commencement of its business,
in connection with the extension of an undertaking or setting up of a new unit, shall be allowed a
deduction of an amount equivalent to one-fifth of such expenditure for each of the five successive
financial years beginning with the financial year in which the extension of the undertaking is
completed or the new unit commences production or operation. However, any expenditure in excess
of 5% of the cost of the project or the capital employed in the business of the Company, shall be
ignored for the purpose of computing the deduction allowable under section 35D of the Act.
2.
As per the explanation to Section 37 of the Act, any expenditure incurred by the Company on the
activities relating to Corporate Social Responsibility (‘CSR’) referred to in section 135 of the
Companies Act, 2013 shall not be deemed to be an expenditure incurred by the Company for the
purpose of the business or profession. However, CSR expenditure which is of the nature described
in provisions of Sections 30 to 36 of the Act shall be allowed as deduction under respective sections,
subject to fulfillment of conditions, if any, specified therein.
Deduction for donations
The Company is entitled to a deduction under Section 80G of the Act in respect of amounts contributed
as donations to various charitable institutions and funds covered under that Section, in respect of such
amounts and subject to the fulfillment of conditions prescribed therein. No deduction shall be allowed
under Section 80G of the Act for any sum exceeding Rs.10,000 unless such sum is paid by any mode
other than cash.
2.2 Taxability of Capital Gains
2.2.1
Capital assets may be categorized into short-term capital assets and long-term capital assets based on the
period for which they are held by a tax payer.
A security (other than a unit) listed in a recognized stock exchange in India or units of the Unit Trust of
India established under the Unit Trust of India Act, 1963 or a unit of an equity oriented fund or a zero
coupon bond are considered as long-term capital assets if they are held for a period of more than 12
months immediately preceding the date of their transfer. Consequently, capital gains arising on sale of
these assets are considered as ‘long-term capital gains’ or LTCG.
Capital gains arising on sale of these assets held for a period of 12 months or less are considered as 'shortterm capital gains' or STCG.
In case of a share of a Company (not being a share listed in a recognized stock exchange in India), it shall
be considered as long-term capital asset if it has been held by CFSL for more than 24 months immediately
preceding the date of its transfer.
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2.2.2
As per Section 10(38) of the Act, capital gains arising from transfer of a long-term capital asset being an
equity share in the Company or an unit of an equity oriented fund, where the transaction of sale is
chargeable to Securities Transaction Tax (‘STT’) or in case the sale is transacted through a recognized
stock exchange located in any International Financial Services Center (IFSC) and where the
consideration for such transaction is paid or payable in foreign currency, shall be exempt from tax in the
hands of the Company.
For this purpose, ‘Equity oriented fund’ means a fund –
i) where the investible funds are invested by way of equity shares in the domestic companies to the
extent of more than 65% of the total proceeds of such funds; and
ii) which has been set up under a scheme of a Mutual fund specified under Section 10(23D) of the Act.
However, the long-term capital gains arising on sale of share or units referred above shall not be reduced
while calculating the book profit under the provisions of Section 115JB of the Act. In other words, such
book profit shall include the long-term capital gain as referred to in Section 10(38) of the Act and the
Company will be required to pay MAT @ 18.5% (9% in the case of an assessee being a unit located in
an IFSC) (increased by surcharge and cesses as applicable) on such book profit.
2.2.3
Section 48 of the Act, (which prescribes the mode of computation of capital gains) provides for deduction
of cost of acquisition / improvement and expenses incurred in connection with the transfer of a capital
asset from the sale consideration to arrive at the amount of capital gains.
However, in respect of long-term capital gains (as defined above), a deduction of indexed cost of
acquisition / improvement is available.
Indexed cost of acquisition means an amount which bears to the cost of acquisition the same proportion
as Cost Inflation Index (CII) for the year in which the asset is transferred bears to the CII for the first
year in which the asset was held by the taxpayer or for the year beginning on April 1, 1981, whichever
is later. In other words, indexed cost of acquisition is computed as under:
Cost of acquisition (x) CII of the FY in which the asset is transferred
CII of the FY in which the asset was first held by the tax payer or for the year beginning on April 1,
1981 whichever is later
2.2.4
As per the provisions of Section 112 of the Act, long-term capital gains to the extent not exempt under
Section 10(38) of the Act would be subject to tax in the hands of the Company at the rate of 20% (plus
applicable surcharge, education cess and secondary & higher education cess).
However, as per the proviso to Section 112(1) of the Act, if the tax on long-term capital gains resulting
from transfer of listed securities (other than a unit) to the extent not exempt under Section 10(38) of the
Act, calculated at the rate of 20% (with indexation benefit) exceeds the tax on long-term gains computed
at the rate of 10% (without indexation benefit), then such gains are chargeable to tax at the concessional
rate of 10% (without indexation benefit) (plus applicable surcharge, education cess and secondary &
higher education cess).
2.2.5
As per the provisions of Section 111A of the Act, short-term capital gains on sale of equity shares or
units of an equity oriented fund, where the transaction of sale is chargeable to STT or in case the sale is
transacted through a recognized stock exchange located in any International Financial Services Center
and where the consideration for such transaction is paid or payable in foreign currency, shall be subject
to tax at a rate of 15% (plus applicable surcharge, education cess and secondary & higher education cess).
Short-term capital gains arising from transfer of shares, other than those covered by Section 111A of the
Act, would be subject to tax at the normal rate as applicable to the Company which is presently 30%
(plus surcharge, education cess and secondary & higher education cess as may be applicable).
2.2.6
Under Section 54EC of the Act and subject to the conditions specified therein, long-term capital gains
arising to the Company would be exempt from tax if such capital gains are invested within 6 months
after the date of such transfer in long term (i.e. redeemable after 3 years) specified assets, being bonds
(as presently notified) issued by:
143
i)
National Highway Authority of India constituted under Section 3 of The National Highways
Authority of India Act, 1988; or
ii) Rural Electrification Corporation Limited, the Company formed and registered under the Companies
Act, 1956.
The investment made in such bonds during any FY cannot however exceed Rs.5,000,000.
If only a part of the capital gains is invested, the exemption available shall be in the same proportion as
the cost of long term specified assets bears to the whole of the capital gain. However, in case the long
term specified assets are transferred or converted into money within 3 years from the date of their
acquisition, the amount of capital gains so exempt shall be chargeable to tax during the year of such
transfer or conversion.
As long term capital gains covered under Section 10(38) of the Act are exempt from tax, there is no
requirement to invest under Section 54EC of the Act in such cases.
2.2.7
Under Section 54EE of the Act and subject to the conditions specified therein, long-term capital gains
arising to any assessee would be exempt from tax if such capital gains are invested within 6 months after
the date of such transfer in long term specified asset, which mean unit or units, issued before April 1,
2019 of such fund as may be notified by the Central Government in this behalf, subject to investment
ceiling of Rs. 50 lakhs.
2.2.8
As per Section 50 of the Act, where a capital asset is forming part of a block of assets in respect of which
depreciation has been allowed under the Act, capital gains shall be computed in the following manner:


2.2.9
where full value of consideration on account of transfer of any asset forming part of block of asset,
as reduced by expenditure incurred wholly or exclusively in connection with transfer, exceeds the
written down value of block of assets and actual cost of assets acquired during the year, such excess
shall be deemed to be short term capital gains and taxed accordingly.
where any block of assets ceases to exist, for the reason that all the assets in that block are transferred,
the difference between the consideration arising on result of transfer and the written down value of
block of assets and the actual cost of assets acquired during the year, shall be deemed to be short
term capital gains / (losses) and taxed accordingly.
Under Section 70(2) of the Act, the Company can set off short term capital loss against other short term
capital gain or long term capital gain. Under Section 70(3) of the Act, the Company can set off long term
capital loss against other long term capital gain alone.
Under Section 74 of the Act, the unabsorbed short term capital loss can be carried forward and set off
against capital gains (whether short term or long term) of subsequent years (upto 8 years). Unabsorbed
long term capital loss can be carried forward and set off against long term capital gains only, of
subsequent years (upto 8 years). However as per Section 80 of the Act, the unabsorbed capital loss can
be carried forward only when the return of income has been filed within the time prescribed under Section
139(1) of the Act.
2.3 Taxability of Dividends
2.3.1
As per provisions of Section 10(34) read with Section 115-O of the Act, dividend (both interim and final),
if any, received by the Company on its investments in shares of another Domestic Company is exempt
from tax, provided that such dividend is subject to Dividend Distribution Tax (DDT) in the hands of
dividend declaring company. The dividend referred to in this context includes distribution by a Company
out of accumulated profits.
2.3.2
The domestic company distributing dividends will be liable to pay DDT at the rate of 15% on gross basis
on the amount of dividend payable (plus a surcharge of 12% on the dividend distribution tax and
education cess and secondary and higher education cess of 2% and 1% respectively on the amount of
dividend distribution tax and surcharge thereon). The amount of distribution of dividend to shareholders
has to be grossed up for the purpose of DDT, so that the shareholders receive the net distributed profits,
in full. Thus, the effective rate of DDT would be 20.36% of the amount of dividend declared, distributed
or paid by the Company.
144
In calculating the amount of dividend on which DDT is payable, dividends (if any, received by the
Company during the assessment year and subject to fulfillment of the conditions), shall be reduced by:


dividends received by the domestic company from a subsidiary of the Company (a company shall
be a subsidiary of another company, if such other company, holds more than half in nominal value
of the equity shares capital of the company) & which has been subjected to DDT; or
where such subsidiary is a foreign company, the tax is payable under Section 115BBD of the Act by
the domestic company.
As per the proviso to this Section, the same amount of dividend would not be taken into account for
reduction more than once.
2.3.3
As per provisions of Section 10(35) of the Act, income received in respect of units of a mutual fund
specified under Section 10(23D) of the Act (other than income arising from transfer of such units)
is exempt from tax.
2.3.4
Under Section 14A of the Act, no deduction is permitted in respect of expenditure incurred in relation
to earning of income which is not chargeable to tax including dividends exempt under Section 10(34)
of the Act. The expenditure relatable to ‘exempt income’ needs to be determined in accordance with
the provisions specified in Section 14A of the Act read with Rule 8D of the Income-tax Rules, 1962
(‘the Rules’).
2.4 Availing the benefit of Double Taxation Avoidance Agreement (DTAA)
Under the provisions of Section 90 of the Act, the Company shall be eligible for claiming credit of taxes
doubly paid by it on income, both in India and in the foreign countries with which the Government of India
has entered into DTAA. The tax credit shall be available as per the provisions of the Act or the relevant
DTAA, whichever are more beneficial to the taxpayer.
Section 91 of the Act provides for unilateral relief in respect of taxes paid on incomes in the foreign countries
with which no DTAA exists. Under the provisions of said Section, the Company shall be entitled to deduction
from the Indian income-tax of sum calculated on such doubly taxed income at the Indian rate of tax or rate of
tax in the foreign country, whichever is lower.
2.5 Corporate Tax Rate and Minimum Alternative Tax (‘MAT’)
2.5.1
The tax rate applicable to the CFSL for the FY ended March 31, 2017 is 29% (in case turnover is upto
Rs. 5 crore) or 30% (in case turnover exceeds Rs. 5 crore) on taxable income under the normal provision
of the Act or 18.5% on book profits under MAT, whichever is higher. A surcharge on income tax of 7%
is case of domestic company having a total income exceeding Rs. one crore, but not exceeding Rs. ten
crore and 12% in case of domestic company having a total income exceeding Rs. ten crore. Education
cess of 2% and Secondary & Higher Education cess of 1% is levied on the amount of tax and surcharge.
2.5.2
As per provisions of Section 115JAA of the Act, the Company is eligible to claim credit for MAT paid
in the current year against the normal income-tax payable in subsequent years.
MAT credit is allowed for any assessment year to the extent of difference between the tax payable as per
the normal provisions of the Act and the tax paid under Section 115JB for that assessment year. Such
MAT credit is available for set-off up to 10 years succeeding the assessment year in which the MAT
credit arises.
3
Benefits available to the Shareholders:
3.1 Taxability of Dividends
3.1.1
Under Section 10(34) of the Act, income by way of dividends (whether interim or final) referred to in
Section 115-O of Act received on the equity shares is exempt from income-tax in the hands of
shareholders.
145
W.e.f. FY 2016-17, income by way of dividend (in aggregate) in excess of Rs. 10 lakh shall be chargeable
to tax in the case of an individual, Hindu undivided family (HUF) or a firm who is resident in India, at
the rate of 10%. The taxation of dividend income in excess shall be on gross basis.
3.1.2
Under Section 115E of the Act, where the dividend income is received by a Non-Resident Indian (‘NRI’)
(other than dividend exempt under Section 10(34) of the Act), then the same is taxable at the rate of 20%
(increased by surcharge and cesses as applicable) provided the investment has been made in convertible
foreign exchange. NRI means an individual being a Citizen of India or a Person of Indian origin who is
a non-resident. The NRI may, by election, choose to be governed by this Section which provides for
concessional rate of tax, else taxation would be computed by applying normal provisions.
3.1.3
Where such dividend is received by a Company, such dividend is to be excluded while computing MAT
liability. However, it is pertinent to note that Section 14A of the Act restricts claims for deduction of
expenses incurred in relation to exempt income. Thus, any expense incurred to earn the exempt dividend
income is not allowable expenditure in accordance with Section 14A of the Act and rules thereunder.
3.1.4
As per section 94(7) of the Act, losses arising from sale/transfer of shares, where such shares are
purchased within the said three months prior to the record date and sold within three months from the
record date, will be disallowed to the extent such loss does not exceed the amount of dividend claimed
exempt. ‘Record date’ means such date as may be fixed by a Company for the purposes of dividend
distribution.
3.1.5
As per section 56(2(vii) of the Act, where an individual or Hindu Undivided Family received the shares
a) without consideration where the aggregate fair market value of such shares exceeded Rs. 50,000 or b)
for a consideration which was less than the aggregate fair market value of such shares by Rs. 50,000,
then the fair market value of such shares shall be treated as ‘income from other sources’ in the hands of
the recipient individual or Hindu Undivided Family. This provision shall not apply to any shares received
from any relative (defined under the Act) or on the occasion of the marriage of the individual or under a
will and so on.
3.2 Taxability of Capital Gains
3.2.1
Capital assets may be categorized into short-term capital assets and long-term capital assets based on the
period for which they are held by a tax payer.
A security (other than a unit) listed in a recognized stock exchange in India or units of the Unit Trust of
India established under the Unit Trust of India Act, 1963 or a unit of an equity oriented fund or a zero
coupon bond are considered as long-term capital assets if they are held for a period more than 12 months
immediately preceding date of their transfer. Consequently, capital gains arising on sale of these assets
are considered as ‘long-term capital gains’.
Capital gains arising on sale of these assets held for a period of 12 months or less are considered as 'shortterm capital gains'.
3.2.2
As per Section 10(38) of the Act, capital gains arising from transfer of a long-term capital asset being an
equity share in the Company or an unit of an equity oriented fund, where the transaction of sale is
chargeable to Securities Transaction Tax (‘STT’) or in case the sale is transacted through a recognized
stock exchange located in any International Financial Services Center and where the consideration for
such transaction is paid or payable in foreign currency, shall be exempt from tax in the hands of the
Company.
For this purpose, ‘Equity oriented fund’ means a fund –
i) Where the investible funds are invested by way of equity shares in the domestic companies to the
extent of more than 65% of the total proceeds of such funds; and
ii) Which has been set up under a scheme of a Mutual fund specified under Section 10(23D) of the Act.
However, the long-term capital gains arising on sale of share or units referred above shall not be reduced
while calculating the book profit under the provisions of Section 115JB of the Act. In other words, such
book profit shall include the long-term capital gain as referred to in Section 10(38) of the Act and the
146
Company will be required to pay MAT @ 18.5% (plus applicable surcharge, education cess and
secondary & higher education cess) on such book profit.
3.2.3
Section 48 of the Act, (which prescribes the mode of computation of capital gains) provides for deduction
of cost of acquisition / improvement and expenses incurred in connection with the transfer of a capital
asset from the sale consideration to arrive at the amount of capital gains.
However, in respect of long-term capital gains (as defined above), a deduction of indexed cost of
acquisition / improvement is available.
Indexed cost of acquisition means an amount which bears to the cost of acquisition the same proportion
as Cost Inflation Index (CII) for the year in which the asset is transferred bears to the CII for the first
year in which the asset was held by the taxpayer or for the year beginning on April 1, 1981, whichever
is later. In other words, indexed cost of acquisition is computed as under:
Cost of acquisition (x) CII of the FY in which the asset is transferred
CII of the FY in which the asset was first held by the tax payer or for the year beginning on April 1,
1981 whichever is later
3.2.4
As per the provisions of Section 112 of the Act, long-term capital gains to the extent not exempt under
Section 10(38) of the Act would be subject to tax in the hands of the Company at the rate of 20%
(increased by surcharge and cesses as applicable)
However, as per the proviso to Section 112(1) of the Act, if the tax on long-term capital gains resulting
from transfer of listed securities (other than a unit) to the extent not exempt under Section 10(38) of the
Act, calculated at the rate of 20% (with indexation benefit) exceeds the tax on long-term gains computed
at the rate of 10% (without indexation benefit), then such gains are chargeable to tax at the concessional
rate of 10% (without indexation benefit) (increased by surcharge and cesses as applicable).
3.2.5
As per the provisions of Section 111A of the Act, short-term capital gains on sale of equity shares or
units of an equity oriented fund, where the transaction of sale is chargeable to STT or in case the sale is
transacted through a recognized stock exchange located in any International Financial Services Center
and where the consideration for such transaction is paid or payable in foreign currency, shall be subject
to tax at a rate of 15% (increased by surcharge and cesses as applicable). Short-term capital gains arising
from transfer of shares, other than those covered by Section 111A of the Act, would be subject to tax at
the normal rate as applicable to the Company which is 30% (increased by surcharge and cesses as
applicable).
3.2.6
In case of a NRI, any LTCG arising from transfer of shares (not exempt under Section 10(38) of the Act)
shall be taxed at a concessional rate of 10% (increased by surcharge and cesses as applicable) without
the indexation benefit but with protection against foreign exchange fluctuation under the first proviso to
Section 48 of the act, subject to satisfaction of certain conditions. The NRI may, by election, choose to
be governed by this Section which provides for concessional rate of tax, else taxation would be computed
by applying normal provisions.
3.2.7
Under Section 54EC of the Act and subject to the conditions specified therein, long-term capital gains
arising to the Company would be exempt from tax if such capital gains are invested within 6 months
after the date of such transfer in long term (i.e. redeemable after 3 years) specified assets, being bonds
issued by:
i)
National Highway Authority of India constituted under Section 3 of The National Highways
Authority of India Act, 1988; or
ii) Rural Electrification Corporation Limited, the Company formed and registered under the Companies
Act, 1956.
The investment made in such bonds during any FY cannot exceed Rs.5,000,000.
If only a part of the capital gains is invested, the exemption available shall be in the same proportion as
the cost of long term specified assets bears to the whole of the capital gain. However, in case the long
term specified assets are transferred or converted into money within 3 years from the date of its
147
acquisition, the amount of capital gains so exempt shall be chargeable to tax during the year of such
transfer or conversion.
As long term capital gains covered under Section 10(38) of the Act are exempt from tax, there is no
requirement to invest under Section 54EC of the Act in such cases.
3.2.8
Under Section 54EE of the Act and subject to the conditions specified therein, long-term capital gains
arising to any assessee would be exempt from tax if such capital gains are invested within 6 months after
the date of such transfer in long term specified asset, which mean unit or units, issued before April 1,
2019 of such fund as may be notified by the Central Government in this behalf, subject to investment
ceiling of Rs. 50 lakhs.
3.2.9
Under Section 54F of the Act and subject to the conditions specified therein, LTCG arising arising to an
individual or HUF from transfer of shares is exempt from tax if the net consideration from such transfer
is utilized within a period of one year before or two years after the date of transfer, for purchase of a new
residential house, or for construction of residential house property, in India, within three years from the
date of transfer.
3.2.10
Under Section 70(2) of the Act, the Company can set off short term capital loss against other short term
capital gain or long term capital gain. Under Section 70(3) of the Act, the Company can set off long term
capital loss against other long term capital gain alone.
Under Section 74 of the Act, the unabsorbed short term capital loss can be carried forward and set off
against capital gains (whether short term or long term) of subsequent years (upto 8 years). Unabsorbed
long term capital loss can be carried forward and set off against long term capital gains only, of
subsequent years (upto 8 years). However as per Section 80 of the Act, the unabsorbed capital loss can
be carried forward only when the return of income has been filed within the time prescribed under Section
139(1) of the Act.
4
Benefits available to the Foreign Institutional Investors (‘FII’s):
4.1.1
Taxability of Dividends
4.1.2
Under Section 10(34) of the Act, income by way of dividends (whether interim or final) referred to in
Section 115-O of Act received on the equity shares is exempt from income-tax in the hands of
shareholders.
4.1.3
Where such dividend is received by a Company, such dividend is to be excluded while computing MAT
liability. However, it is pertinent to note that Section 14A of the Act restricts claims for deduction of
expenses incurred in relation to exempt income. Thus, any expense incurred to earn the exempt dividend
income is not allowable expenditure in accordance with Section 14A of the Act and rules thereunder.
4.1.4
As per section 94(7) of the Act, losses arising from sale/transfer of shares, where such shares are
purchased within the said three months prior to the record date and sold within three months from the
record date, will be disallowed to the extent such loss does not exceed the amount of dividend claimed
exempt. ‘Record date’ means such date as may be fixed by a Company for the purposes of dividend
distribution.
4.2 Taxability of Capital Gains
4.2.1
Capital assets may be categorized into short-term capital assets and long-term capital assets based on the
period for which they are held by a tax payer.
A security (other than a unit) listed in a recognized stock exchange in India or units of the Unit Trust of
India established under the Unit Trust of India Act, 1963 or a unit of an equity oriented fund or a zero
coupon bond are considered as long-term capital assets if they are held for a period more than 12 months
immediately preceding date of their transfer. Consequently, capital gains arising on sale of these assets
are considered as ‘long-term capital gains’.
148
Capital gains arising on sale of these assets held for a period of 12 months or less are considered as 'shortterm capital gains'.
4.2.2
Section 2(14) of the Act provides that any security including equity shares held by a FII who has invested
in such securities in accordance with the regulations made under Securities & Exchange Board of India
Act, 1992 would be treated as a capital asset so that any income arising from transfer of such security by
the FII would be treated in the nature of capital gains and not in the nature of income from business.
4.2.3
Under Section 10(38) of the Act, LTCG arising to a shareholder on transfer of equity shares would be
exempt from tax where the sale transaction has been entered into on a recognized Stock Exchange of
India and is liable to STT.
4.2.4
Under Section 115AD(1)(ii) of the Act, income by way of STCG arising to the FII on transfer of shares
shall be chargeable at a rate of 30%, where such transactions are not subjected to STT, and at the rate of
15% if such transaction of sale is entered on a recognized stock exchange in India and is chargeable to
STT. The above rates are to be increased by surcharge at the rate of 2% where income of the FII shall be
between Rs. 1 – 10 crores and at the rate of 5% for income beyond Rs. 10 crores. Education cess of 2%
and Secondary & Higher Education cess of 1% is levied on the amount of tax and surcharge.
4.2.5
Under Section 115AD(1)(iii) of the Act, income by way of LTCG arising from the transfer of shares (in
cases not covered under Section 10(38) of the Act) held in the Company will be taxable at the rate of
10% (increased by surcharge and cesses as applicable). The benefits of indexation of cost and of foreign
currency fluctuations are not available to FIIs.
4.2.6
Under Section 54EC of the Act and subject to the conditions specified therein, long-term capital gains
arising to the Company would be exempt from tax if such capital gains are invested within 6 months
after the date of such transfer in long term (i.e. redeemable after 3 years) specified assets, being bonds
issued by:
i)
National Highway Authority of India constituted under Section 3 of The National Highways
Authority of India Act, 1988; or
ii) Rural Electrification Corporation Limited, the Company formed and registered under the Companies
Act, 1956.
The investment made in such bonds during any FY cannot exceed Rs.5,000,000.
If only a part of the capital gains is invested, the exemption available shall be in the same proportion as
the cost of long term specified assets bears to the whole of the capital gain. However, in case the long
term specified assets are transferred or converted into money within 3 years from the date of its
acquisition, the amount of capital gains so exempt shall be chargeable to tax during the year of such
transfer or conversion.
As long term capital gains covered under Section 10(38) of the Act are exempt from tax, there is no
requirement to invest under Section 54EC of the Act in such cases.
4.2.7
Under Section 54EE of the Act and subject to the conditions specified therein, long-term capital gains
arising to any assessee would be exempt from tax if such capital gains are invested within 6 months after
the date of such transfer in long term specified asset, which mean unit or units, issued before April 1,
2019 of such fund as may be notified by the Central Government in this behalf, subject to investment
ceiling of Rs. 50 lakhs.
4.3 Availing the benefit of DTAA
4.3.1
In respect of FIIs, the tax rates and consequent taxation mentioned above will be further subject to any
benefits, if any, available under the DTAA between India and the country of residence of the FII. As per
Section 90(2) of the Act, the provisions of the Act or the DTAA, whichever are more beneficial to the
taxpayer, would be applicable. Thus, FIIs can opt to be governed by the provisions of the Act or the
applicable tax treaty, whichever is more beneficial.
149
4.3.2
As per section 90(4) of the Act, the FIIs shall not be entitled to claim relief under section 90(2) of the
Act, unless a certificate of their being a resident in any country outside India, is obtained by them from
the government of that country i.e. Tax Residency Certificate. As per section 90(5) of the Act, the FIIs
shall be required to provide such other information, as may be notified.
4.4
Deduction of Tax At-Source
As per Section 196D of the Act, no tax is to be deducted from any income, by way of capital gains (shortterm or long-term) arising from the transfer of securities referred to in section 115AD, payable to a FII.
5
Benefits available to Venture Capital Funds / Companies:
5.1
Under Section 10(23FB) of the Act, any income of Venture Capital Companies or Venture Capital Funds
registered with the Securities and Exchange Board of India, from investment in a venture capital
undertaking would be exempt from income tax, subject to conditions specified therein. ‘Venture capital
undertaking’ means:

A venture capital undertaking as defined in clause (n) of the regulation 2 of Securities and
Exchange Board of India (Venture Capital Funds) Regulations, 1996 or

A venture capital undertaking as defined in clause (aa) of sub regulation (1) of regulation 2 of
Alternate Investment Fund Regulations.
5.2
According to Section 115U of the Act, any income accruing or arising to or received by a person from
his investment in venture capital companies/ funds would be taxable in his hands in the same manner as
if it were the income accruing/ arising/ received by such person had the investments been made directly
in the venture capital undertaking.
5.3
Further, as per Section 115U(5) of the Act, the income accruing or arising to or received by the Venture
Capital Company/ Funds from investments made in a Venture Capital Undertaking if not paid or credited
to a person (who has made investments in a Venture Capital Company/ Fund) shall be deemed to have
been credited to the account of the said person on the last day of the previous year in the same proportion
in which such person would have been entitled to receive the income had it been paid in the previous
year.
6
Benefits available to Investment Funds
6.1
Under Section 10(23FBA) of the Act, any income except for income under the head "Profits and Gains
of Business/ Profession" of Investment fund, registered as Category-I or category-II Alternative
Investment Fund under the Securities and Exchange Board of India (Alternate Investment Fund)
regulations, 2012 would be exempt from income tax, subject to conditions specified therein.
6.2
According to Section 115UB of the Act, any income accruing or arising to or received by a person from
his investment in investment funds would be taxable in his hands in the same manner as if it were the
income accruing/ arising/ received by such person had the investments been made directly in the
company.
6.3
Further, as per Section 115UB(6) of the Act, the income accruing or arising to or received by the
Investment Fund if not paid or credited to a person (who has made investments in an Investment Fund)
shall be deemed to have been credited to the account of the said person on the last day of the previous
year in the same proportion in which such person would have been entitled to receive the income had it
been paid in the previous year.
7
Benefits available to the Mutual Funds:
Under Section 10(23D) of the Act, any income of mutual funds registered under the Securities and Exchange
Board of India Act, 1992 or regulations made thereunder or mutual funds set up by public sector banks or public
financial institutions or mutual funds authorized by the Reserve Bank of India, is exempt from tax, subject to such
conditions as the Central Government may, by notification in the Official Gazette, specify in this behalf.
150
B. UNDER THE WEALTH TAX ACT, 1957
The Finance Act, 2015 has abolished the levy of wealth tax under the Wealth Tax Act, 1957 with effect
from 1 April 2016.
C. UNDER THE GIFT TAX ACT, 1958
Gift made after 1 October 1998 is not liable for any gift tax, and hence, gift of shares of the company would
not be liable for any gift tax.
Notes
1.
The above statement of possible direct tax benefits sets out the provisions of law in a summary manner only
and is not a complete analysis or listing of all potential tax consequences of the purchase, ownership and
disposal of Shares.
2.
The above statement covers only certain relevant direct tax law benefits and does not cover any indirect tax
law benefits or benefit under any other law.
3.
The above statement states the possible tax benefits available to the Company and to the shareholders of the
Company under the provisions of the Income-tax Act, 1961 (‘the Act’) as amended by the Finance Act, 2016
(i.e. applicable for financial year 2016-17, relevant to the assessment year 2017-18) presently in force in India
as on the signing date. The benefits as stated are dependent on the Company or its shareholders fulfilling the
conditions prescribed under the relevant provisions of the Act failing which the stated benefits may be wholly
or partially denied.
4.
This statement is only intended to provide general information to the investors and is neither designed nor
intended to be a substitute for professional tax advice. A shareholder is advised to consult his/ her/ their own
tax consultant with respect to the tax implications arising out of their participation in the proposed Qualified
Institutional Placement of Equity Shares of the Company particularly in view of case specific nature of the
tax consequences and the changing tax laws in India.
5.
In respect of non-residents, the tax rates mentioned above would be further subject to specific benefits, if any,
available under the relevant Double Taxation Avoidance Agreement, between India and the Country in which
the non-resident has tax domicile.
6.
No assurance is given that the revenue authorities/courts will concur with the views expressed herein. Our
views are based on the existing provisions of law and its interpretation, which are subject to changes from
time to time. We do not assume responsibility to update the views consequent to such changes.
151
LEGAL PROCEEDINGS
Our Company, from time to time, is involved in various legal proceedings in the ordinary course of business,
which involve matters pertaining to, amongst others, civil proceedings including tax related disputes. There is no
outstanding criminal proceedings involving our Company and Directors. Presently, our Subsidiaries are not
involved in any outstanding litigation, whether civil or criminal proceedings. In terms of Policy for Determination
of Materiality of Events or Information, as adopted by the Board on February 12, 2016, our Company is not
involved in any material outstanding civil (including tax) litigation. The Company believes that the number of
proceedings and disputes in which the Company is involved are not unusual for a company of its size in the context
of doing business in India and in international markets.
Criminal proceedings against Subsidiaries
Whilst our Subsidiaries are not involved in any outstanding litigation, whether civil or criminal proceedings, there
has been a criminal investigation for manslaughter initiated in relation to an accident that took place in the
manufacturing facility at Ravenna of CFS Europe. Some of the employee of CFS Europe and the chief executive
officer of CFS Europe have received warning notice from the Italian investigating agency. However, there is no
outstanding proceedings in this regard.
Except as stated below, there are no litigation or legal action pending or taken by any ministry or
government department or statutory authority against our promoter or promoter group during the last
three years and any direction issued by any such ministry or department or statutory authority upon
conclusion of such litigation or legal action, as on date of this Preliminary Placement Document
Nil
Details of acts of material frauds committed against our Company in the last three years, if any, and if so,
the action taken by our Company
Nil
Details of default, if any, including therein the amount involved, duration of default and present status, in
repayment of:
As of date of this Preliminary Placement Document, there are no outstanding default in payment of statutory dues,
repayment of debentures and interest thereon, repayment of deposits and interest thereon and repayment of loan
from any bank or financial institution and interest thereon.
Except the following, as on March 31, 2016, there are no dues of income tax, sales tax, wealth tax, service tax,
customs duty, excise duty, value added tax and cess which have not been deposited on account of disputes:
Statute name
Maharashtra Value Added
Tax Act, 2002
Central Sales Tax, 1956
Value added
tax
77.16
Period to
which the
amount
relates
2010-2011
Sales tax
655.28
2010-2011
Nature of
dues
Amount
(Rs. in
lakh)
Forum where the
dispute is pending
Deputy Commissioner
Appeals
Deputy Commissioner
Appeals
Further, our Company has received an assessment order under the Maharashtra Value Added Tax Act, 2002 dated
May 25, 2016 from the Deputy Commissioner of Sales Tax Officer, Palghar for a demand of Rs. 14.26 lakh. Our
Company is in the process of appealing against the said order.
Our Company has also received assessment orders under the Maharashtra Value Added Tax Act, 2002 dated
March 19, 2016 (received by the Company on June 7, 2016) from the Deputy Commissioner of Sales Tax Officer,
Palghar for a demand of Rs. 236.60 lakh. Our Company is in the process of appealing against the said orders.
152
Summary of reservations, emphasis of matters, qualifications or adverse remarks of auditors in the last five
financial years immediately preceding the year of circulation of this offer letter and of their impact on the
financial statements and financial position of our Company and the corrective steps taken and proposed to be
taken by our Company for each of the said reservations or qualifications or adverse remark
Fiscal
Reproduction of auditors remark from the audit report
Management’s response
2016
We draw attention to Note No. 12 of the financial statements
in respect of the Company’s investment of Rs. 56.01 lakhs in
and loans of Rs. 160.33 lakhs given to its subsidiary
company recoverability of which is based on successful
implementation of management’s future plans in respect of
the subsidiary.
We draw attention to Note No. 12 of the financial statements
in respect of the Company’s investment of Rs. 56 Lacs in and
loans of Rs. 122.89 Lacs given to its subsidiary company
recoverability of which is based on successful
implementation of management’s future plans in respect of
the subsidiary.
Adequate amount was accounted in
the books of accounts based on our
estimate of the recoverability of
loan and value of investment.
2015
Adequate amount was accounted in
the books of accounts based on our
estimate of the recoverability of
loan and value of investment.
The Company has granted unsecured loans to 8 companies
covered in the register maintained under Section 189 of the
Act which aggregated Rs. 1,481.59 Lacs at March 31, 2015.
The Company has written off Rs. 65.41 Lacs of loans given
to two companies listed under Section 189 of the Act. Other
than this except for a loan to a company aggregating Rs.
390.40 Lacs outstanding towards principal and interest, the
parties are repaying the principal amounts, as stipulated,
and are also regular in payment of interest as applicable.
2014
In respect of the aforesaid loans, in the cases where the
overdue amount is more than Rs. 1 lakh, in our opinion,
except for loans and interest thereon aggregating Rs. 390.40
Lacs (a provision of ` 160 Lacs has been made in respect of
the loan upto March 31, 2015), reasonable steps have been
taken by the Company for the recovery of the principal
amounts and interest. In respect of this loan of Rs. 390.40
Lacs, the Company is in discussions with the borrower for
recovery of the amount.
The Company has granted unsecured loans, to 5 parties
covered in the register maintained under Section 301 of the
Act. The maximum amount involved during the year and the
year-end balance of such loans aggregated to Rs. 3,564.86
lacs and Rs. 2,735.67 lacs, respectively.
The Company has written off Rs. 708.32 lakhs of a loan given
to a company listed under Section 301 of the Act. Other than
this except for 385.23 lakhs outstanding towards principal
and interest, the parties are repaying the principal amounts,
as stipulated, and are also regular in payment of interest as
applicable.
In respect of the aforesaid loans, in the cases where the
overdue amount is more than Rupees One Lakh, in our
opinion, except for loans and interest thereon aggregating
Rs. 385.23 lakhs, reasonable steps have been taken by the
Company for the recovery of the principal amounts and
interest.
153
Adequate amount was accounted in
the books of accounts based on our
estimate of the recoverability of
loan and value of investment.
Fiscal
2013
2012
Reproduction of auditors remark from the audit report
Management’s response
The Company had not specifically earmarked the available
free liquid assets of Rs. 1.05 crores as required under the
Companies (Acceptance of Deposits) Rules, 1975 within the
specified period. However, on the date of approval of
financial statements, the management had initiated steps for
earmarking these available investments as required under
the said rules.
Though the assets were not
specifically
earmarked,
the
Company had adequate available
free liquid assets as required as on
the balance sheet date. This
procedural anomaly was duly
rectified in the subsequent financial
year.
In our opinion and according to the information and
explanations given to us, the term loans taken by the
Company have been applied for the purposes for which they
were obtained except in respect of the proceeds of a foreign
currency term loan of Rs. 167 lakhs obtained for onward
lending to the Company’s subsidiary in Europe for part
financing that subsidiary’s capital expenditure and Rs. 305
lakhs out of a Rupee term loan taken during the year.
The foreign currency term loan can
be lent to the subsidiary within a
specified period after the drawdown
of such loan as per the agreed terms
with the lenders and that it has
initiated steps for the same and that
the Company’s subsidiary has
incurred the necessary capital
expenditure prior to March 31,
2014. In respect of the term loan of
Rs. 305 lakhs, management has
represented that Rs. 141 lakhs has
been applied post year-end for the
purposes for which it was borrowed
and that the balance of Rs. 164 lakhs
would be applied within the period
specified with the lenders, pending
which it has been deposited in the
overdraft accounts of the Company.
Except for an amount aggregating Rs. 1138.64 lacs
outstanding towards principal and interest, the parties are
repaying the principal amounts, as stipulated, and are also
regular in payment of interest as applicable.
Adequate amount was accounted in
the books of accounts based on our
estimate of the recoverability of
loan and value of investment.
In respect of the aforesaid loans, in the cases where the
overdue amount is more than Rs. One Lakh, in our opinion,
except for loans overdue aggregating Rs. 963.32 lacs,
reasonable steps have been taken by the Company for the
recovery of the principal amounts and interest.
According to the information and explanations given to us,
no undisputed amounts payable in respect of Income Tax,
Sales Tax, Wealth Tax, Service Tax, Customs duty, Excise
duty and Cess are in arrears, as on 31st March, 2012 for a
period of more than six months from the date they became
payable except repayment of deferred sales tax loan which is
overdue amounting to Rs. 0.73 lacs.
The deferred sales tax loan was duly
repaid alongwith interest in the
subsequent financial year.
Other Confirmations
There are no inquiries, inspections or investigations initiated or conducted against our Company or our
Subsidiaries under the Companies Act, 2013 or any previous company law in the last three years immediately
preceding the year of circulation of this Preliminary Placement Document. Further, there are no prosecutions filed,
fines imposed or compounding of offences against our Company and our Subsidiaries in the last three years
immediately preceding the year of circulation of this Preliminary Placement Document.
154
GENERAL INFORMATION
1.
Our Company was incorporated on November 30, 1993 pursuant to certificate of incorporation issued by
RoC, as a private limited company under the name of “Camlicon Consultants Private Limited”. The name
of our Company was changed to “Camlin Fine Chemicals Private Limited” and a fresh certificate of
incorporation consequent upon change of name was issued by the RoC on June 1, 2006. The name of our
Company was changed to “Camlin Fine Chemicals Limited” and a fresh certificate of incorporation
consequent upon change of name on conversion to public limited company was issued by the RoC on
August 11, 2006. The name of our Company was changed to “Camlin Fine Sciences Limited” and a fresh
certificate of incorporation consequent upon change of name was issued by the RoC on August 27, 2011.
The CIN of our Company is L74100MH1993PLC075361. For further details in relation to the change of
the name of the Company, please see “Business – Our History” on page 75.
2.
The Registered Office and corporate office of our Company is situated at “WICEL, Plot No. F/11 and
F/12, Central Road, Opposite SEEPZ Main Gate, Andheri (East), Mumbai 400 093, Maharashtra”.
3.
As at March 31, 2016, our Company’s authorised Share Capital is Rs.15,00,00,000 divided into
15,00,00,000 Equity Shares of Re.1 each and the issued subscribed and paid up share capital is Rs.
9,66,65,830 divided into 9,66,65,830 Equity Shares of Re. 1 each.
4.
In 2006, the “Fine Chemical Division” of Kokuyo Camlin Limited (erstwhile Camlin Limited) was demerged into Camlin Fine Chemicals Limited in terms of the scheme of arrangement sanctioned by the
Bombay High Court pursuant to its order dated November 17, 2006. Pursuant to the de-merger, our
Company was listed on BSE. Our Company was listed on NSE in 2015.
5.
The Issue was approved by the Board on September 25, 2015. The Shareholders of our Company have
authorised the Issue pursuant to a special resolution dated December 2, 2015. The Company has been
authorised to raise funds up to Rs. 1500 lakh by way of issue of securities including Equity Shares,
pursuant to the Issue.
6.
Our Company has received in-principle approvals under Regulation 28(1) of the Listing Regulations to
list the Equity Shares to be issued pursuant to the Issue, both on BSE and NSE on June 28, 2016. We
will apply for final listing and trading approvals of such Equity Shares on the Stock Exchanges.
7.
Copies of Memorandum and Articles of Association will be available for inspection between 11:00 am
to 1:00 pm on all working days, except Saturdays during the Bid/Issue Period at the Registered Office.
8.
Except as disclosed in this Preliminary Placement Document, our Company has obtained necessary
consents, approvals and authorisations required in connection with the Issue.
9.
There has been no material change in the financial or trading position of our Company since March 31,
2016, the date of the Consolidated Financial Statements prepared in accordance with Indian GAAP
included in this Preliminary Placement Document, except as disclosed in this Preliminary Placement
Document.
10.
Except as disclosed in this Preliminary Placement Document, there are no outstanding legal or arbitration
proceedings against or affecting our Company or its assets or revenues, nor is our Company aware of
any pending or threatened legal or arbitration proceedings, which is material in terms of Policy for
Determination of Materiality for Disclosure of Events/Information, as adopted by the Board on February
12, 2016. For further details, see “Legal Proceedings” on page 152.
11.
Our Company’s statutory auditors, B. K. Khare & Co., Chartered Accountants, Firm registration no.
105102W, who have audited the Consolidated Financial Statements as of and for the financial year ended
2016, 2015 and 2014 which have been included in this Preliminary Placement Document.
12.
Our Company confirms that it is in compliance with the minimum public shareholding requirements as
required under the Listing Regulations.
13.
The Floor Price for the Equity Shares under the Issue is Rs. 89.89 per Equity Share which has been
calculated in accordance with Chapter VIII of the SEBI ICDR Regulations.
155
14.
Our Company may offer a discount of not more than 5% on the Floor Price of Rs. 4.49 per Equity Share
in terms of Regulation 85 of the SEBI ICDR Regulations.
15.
Details of the Compliance Officer:
Rahul Sawale
Group Company Secretary and Compliance Officer
WICEL, Plot No. F/11 and F/12
Central Road
Opposite SEEPZ Main Gate, Andheri (East)
Mumbai 400 093
Tel: (91 22) 6700 1000
Fax: (91 22) 2832 4404
Email: [email protected]
156
FINANCIAL INFORMATION
Financial Statements
Page No
Auditors Report and the audited consolidated financial statements for the Financial Year ended
March 31, 2016
Auditors Report and the audited consolidated financial statements for the Financial Year ended
March 31, 2015
Auditors Report and the audited consolidated financial statements for the Financial Year ended
March 31, 2014
F1 – F28
157
F29 – F57
F58 – F92
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DECLARATION
Our Company certifies that all relevant provisions of Chapter VIII and Schedule XVIII of the SEBI ICDR
Regulations have been complied with and no statement made in this Preliminary Placement Document is contrary
to the provisions of Chapter VIII and Schedule XVIII of the SEBI ICDR Regulations and that all approvals and
permissions required to carry on our Company’s business have been obtained, are currently valid and have been
complied with. Our Company further certifies that all the statements in this Preliminary Placement Document are
true and correct.
Signed by:
________________________
Ashish S. Dandekar
Managing Director
Place: Mumbai
Date: June 28, 2016
158
DECLARATION
We, the Directors of the Company certify that:
(i)
the Company has complied with the provisions of the Companies Act, 2013 and the rules made
thereunder;
(ii)
the compliance with the Companies Act, 2013 and the rules does not imply that payment of dividend or
interest or repayment of debentures, if applicable, is guaranteed by the Central Government; and
(iii)
the monies received under the offer shall be used only for the purposes and objects indicated in the
Preliminary Placement Document (which includes disclosures prescribed under Form PAS-4).
Signed by:
________________________
Ashish S. Dandekar
Managing Director
We are severally authorised by the QIP Committee of the Company, vide resolution dated June 28, 2016 to sign
this form and declare that all the requirements of Companies Act, 2013 and the rules made thereunder in respect
of the subject matter of this form and matters incidental thereto have been complied with. Whatever is stated in
this form and in the attachments thereto is true, correct and complete and no information material to the subject
matter of this form has been suppressed or concealed and is as per the original records maintained by the promoters
subscribing to the Memorandum of Association and the Articles of Association.
It is further declared and verified that all the required attachments have been completely, correctly and legibly
attached to this form.
Signed by:
________________________
Ashish S. Dandekar
Managing Director
________________________
Dattatraya R. Puranik
Executive Director and Chief Financial Officer
Place: Mumbai
Date: June 28, 2016
159
ISSUER
Camlin Fine Sciences Limited
WICEL, Plot No. F/11 & F/12
Opp. Seepz Main Gate, Central Road, Andheri (East)
Mumbai 400093
Tel: (91 22) 6700 1000; Fax: (91 22) 2832 4404
Website: www.camlinfs.com; CIN: L74100MH1993PLC075361
Contact Person: Rahul Sawale, Group Company Secretary and Compliance Officer
Details of Compliance Officer
Rahul Sawale
Group Company Secretary and Compliance Officer
WICEL, Plot No. F/11 & F/12
Opp. Seepz Main Gate, Central Road, Andheri (East)
Mumbai 400093
Tel: (91 22) 6700 1000; Fax: (91 22) 2832 4404
Email: [email protected]
BOOK RUNNING LEAD MANAGER
Equirus Capital Private Limited
12th Floor, C Wing, Marathon Futurex
NM Joshi Marg, Lower Parel
Mumbai 400 013
INDIAN LEGAL COUNSEL TO THE ISSUE
Khaitan & Co
One Indiabulls Center
13th Floor, Tower 1
841 Senapati Bapat Marg
Mumbai 400 013
INTERNATIONAL LEGAL COUNSEL FOR SELLING RESTRICTION
Jones Day
138 Market Street
Level 28, CapitaGreen
Singapore 048946
STATUTORY AUDITORS TO OUR COMPANY
B. K. Khare & Co
706/708, Sharda Chambers
New Marine Lines
Mumbai 400 020
160